Big Deal for Small Companies

Alistair Darling is set to announce a bill that should halve the capital gains tax on the first Gbp750,000 (US$1.47m) of profits made by owners of small businesses when they sell-up.

The move comes after heavy lobbying by small entrepreneurs. At last year's autumn pre-budget report Darling made sweeping changes to the capital gains regime by introducing a single rate of 18%. It created a much simplified code and ended, for example, various tapper reliefs. What particularly upset owners of small businesses was an end to the 10% capital gains tax rate on assets held for more than two years.

He is expected to introduce a lower starting rate for owners of small businesses on a similar line to the proposals made by the Federation of Small Business. He is likely to set the rate of capital gains tax at 9% on the first Gbp750,000 (US$1.47m) of profits.

The move comes after vociferous lobbying by small business groups arguing that the tax changes favoured speculators over entrepreneurs and discouraged wealth creation. Large private equity groups were also unhappy over the changes. However, the expected compromise is unlikely to placate them.