CGT to soar but concessions for business activities.
The Conservative Party and the Liberal Democrats have released the full text of their coalition agreement. It indicates that CGT will rise to at or near income tax rates, but that there will be generous exemptions for entrepreneurial business activities.
The joint statement declares: "We further agree to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities".
The Liberal Democrat manifesto envisaged cutting the personal capital gains tax allowance to £2,000. There is no mention of this in the joint statement issued today.
Overall, much will depend on the meaning of the term entrepreneurial business activities. It seems likely that the phrase is intended to include capital gains tax on sale of businesses and private company shares. It also seems likely (though less certain) that the term will also cover employee share option and share ownership schemes - if only because limiting the benefit to the bosses rather than the workers would be seen as intensively negative and damaging to business culture in the UK.
Of course it is one thing to promise preferential treatment for business activities, but quite another to say that the treatment will be as favourable as it is now. There must be a real possibility that rates of tax will rise even for entrepreneurial gains.
Those people who have unrealised gains will need to give careful thought to what to do next. For many, there will be a strong case for realising gains now, before tax rates go up. A major sell off of stocks and shares by private investors is now expected.
For more information on how these changes may affect your company and/or your employee share scheme, please call us on 020 8949 5522 or contact us at email@example.com.