CGT Reform Tops List Of Major Business Concerns

by Stewart Douglas

Story link: CGT Reform Tops List Of Major Business Concerns

Business taxation has today been announced as the number one concern for small to medium businesses in the UK, according to the findings of the Hiscox SME Risk Barometer index, which analyses the major concerns faced by smaller businesses over any given year.

In the second study of its kind, business taxation was cited by business owners as the major concerning factor, particularly in relation to the changes afoot in the realm of capital gains tax and the abolition of the highly advantageous business asset taper relief in April.

With four in five business owners citing the perceived increase in capital gains tax as their major worry for the coming twelve months, it was by some margin the leading cause for concern. Ranking alongside it in the list of top worries were the health of the wider economy and rising energy prices, which ranked as last year’s most prevalent concern.

Whilst taxation has been cited as a major concern amongst business owners, it is submitted that in actuality the changes to the tax system are not as bad as they have been billed by certain sectors of the media, and may indeed actually help certain small businesses oblivious to tax planning processes.

Capital gains tax had previously been taxed at the marginal rate of income tax, i.e. charged at 22% or 40%, depending on whether the party realising the gain was a basic rate or higher rate tax payer.
However the advantageous business asset taper relief, design to offset inflation in capital gains processes, allowed a relief of 75% of the value of a business asset disposed of after 2 years of ownership, taking the effective rate of tax down to just 10% on most gains.

Without financial advice, many business owners would sell assets without the concept of this relief, accruing tax at potentially 40%. However the flat rate 18% CGT to be introduced in April is likely to provide some benefit to small business owners in terms of simplifying the system, which may suggest it is a concern that need not be feared too widely by small businessmen.