CGT - son of retirement relief ?

To coincide with the return this week to our screens of everyone's favourite DCI, Gene Hunt, we now finally have sight of some of the proposed new CGT legislation announced last October by our Chancellor.

It was, perhaps, just too much to expect that commonsense would prevail and the proposals would, at least, be shelved for a year. But, to wait over three months for some flimsy guff about a new entrepreneurs' relief only to find that the same three months is not also sufficient to draw the proposed legislation is pushing it even by the current government's standards of ineptitude. As DCI Hunt would say, that numpty moves slower than a spastic in a magnet factory.

In the absence of anything solid to review, it is only possible to guess, but the new entrepreneurs' relief suggests we will have a re-hash of the old retirement relief code. By the time of its abolition, the relief had become far from satisfactory and so chock full of conditions that it was ironic that the only criterion not needed was for the taxpayer actually to retire.

The new relief will, it would appear, and like the old retirement relief, be restrictive in requiring not just a minimum 5% stake but, also, for the investor to be an officer or employee of the company. This second strand of the new relief will be problematic for many and especially if the old requirement for full time working and involvement in the management of the company is unearthed.

It is all very well for Alistair Darling to say that outside investors can obtain VCT or EIS relief but, for all practical purposes, the former exists only on the statute book and in the rhetoric of politicians, and the latter is often seen as too much like hard work for anyone to bother. As such, small companies, in particular, will find it more difficult to raise equity investment from outsiders who face an 18% rate of tax on any profit, being the same rate as they could pay on the profits enjoyed on real property investments.

Elsewhere, whilst it is said that each individual will have a £1M lifetime allowance, there is no mention of what darling Alistair has in store for married couples. With the bagging of indexation for pre 1998 businesses now being achieved by various means including inter-spousal transfers, there might now be the blackest of black clouds looming with an extension of the income shifting rules into the capital gains regime.

All told, it is difficult to see where the promised simplification is to be found.

Somehow, it is hard to be enthused with the Chancellor's pronouncement in his speech that he ... "is determined that we do as much as possible to encourage entrepreneurship in this country and, in future Budgets will seek to do more".