Alistair Darling, Chancellor of the Exchequer, has delayed his decision on capital gains tax (CGT) until the new year.
He has announced that he is still considering consultations with various parties on the government’s plans for a new CGT regime and therefore, will not publish his revised plans until the new year. It was previously thought that revised proposals would be published before Christmas.
Currently, basic-rate taxpayers who have held shares in their employer for at least two years are only subject to a 5% CGT charge. The Chancellor’s Pre-Budget report proposed changes which would mean these employee shareholders would have to pay an additional 13% tax on any gain above £9,200 from April 2008.
Industry body Ifs ProShare has argued this change would mean employees who have contributed to the success of their employers will now be worse off, while non-employee shareholders will have their CGT liabilities substantially reduced (from 40% to 18%). The organisation has submitted a range of proposals to the Treasury suggesting how the potentially negative impact of such changes can be mitigated.
Fiona Downes, head of employee share ownership at Ifs ProShare, said: “A significant minority of [sharesave] employee shareholders could be negatively affected if the Chancellor does not amend his original proposals for CGT reform. Our research suggests that 16% of [sharesave] participants could be worse off, that’s 272,000 employees, many of whom are relatively low earners.
“We therefore welcomed the Chancellor’s commitment to look again at this issue and his undertaking to publish revised proposals before the end of the year. We hope that the delay announced today will only be a short one. Whilst it’s important that the Government fully considers all proposals, employee shareholders and employers need an end to this uncertainty as quickly as possible.”