A major change to Chancellor Alistair Darling’s plans for a controversial shake-up of the capital gains tax (CGT) regime has been welcomed by the UK200Group as a respite for businesses.

In his October 2007 pre-Budget report, Mr Darling announced that he planned to scrap taper relief on CGT from April 2008. Currently, someone selling shares or a business they have owned for more than two years pays CGT at 10 per cent on profits above their £9,200 tax-free allowance, instead of at 40 per cent, assuming they pay the higher rate of income tax.

Mr Darling planned to levy CGT at a flat rate of 18 per cent and to scrap the indexation allowance, which inflation-proofs an asset´s rise in value, which would have triggered a steep rise in CGT bills.

The proposals attracted opposition from the business community, including the Institute of Directors, the CBI and the Federation of Small Businesses, which regarded the plan as a damaging disincentive to enterprise and investment and a serious blow to small business owners planning retirement sales. A petition opposing the move on the Prime Minister’s website has attracted more than 18,000 signatures.

On Thursday 24 January Mr Darling confirmed that taper relief would cease from 1 April, with a flat rate of 18 per cent – but to help entrepreneurs, he said there would be a 10 per cent rate on gains of up to £1 million.

Duncan Saxby of Peplows said: “This is welcome news, which ends several months of uncertainty for the business community as they waited for Mr Darling to finalise his proposals. It shows the strength of the voice of the UK business sector, and its importance in the country’s economy, that he has modified his plans in the light of some very vocal opposition.

“While he may not have gone as far in amending his proposals as some in the business community would wish, this is still a valuable concession. CGT remains a complex area and anyone considering the sale of a business or substantial shareholding would be wise to seek the advice of a qualified professional in exploring the most beneficial tax options.”