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9 June 2010 CGT rise would ‘penalise 200,000 ‘ordinary taxpayers’

More than 200,000 ‘ordinary employees and savers’ would be hit by a proposed rise in capital gains tax (CGT), the Institute of Directors (IoD) has warned.

As the emergency Budget approaches, the business group is calling on the Government to rethink its plans to tax non-business capital gains at rates similar to those applied to income.

According to the IoD, figures from HM Revenue & Customs indicate that 230,000 individuals a year have gains exceeding the annual exemption, half of which are deemed to be ‘modest’ gains of up to £25,000.

It argued that these assets, which are made on shares and securities, represent ‘vital investment in businesses’ and that people with small shareholdings in firms in which they work were most likely to be penalised by the change.

Miles Templeman, Director General of the IoD said: ‘The more we look at the CGT increase, the more we can see that it will directly penalise many thousands of people who cannot be described as rich. And it will indirectly penalise those who want to live in a thriving economy, because it will deter enterprise and thereby damage growth.’

He continued: ‘The Government says that it cares about the impact of the tax system on enterprise. It now needs to prove it. A generous taper relief would support long-term investment. If that is not introduced, then a broad definition of the business assets that will be protected from the increase, including all shares that are held by directors and employees, will be vital.’