Chancellor delays Capital Gains Tax decision until New Year

Chancellor of the Exchequer Alistair Darling today said he is still considering consultations with various parties on the government's plans for a new capital gains tax regime and will therefore not publish his revised plans until the New Year. The announcement follows a previous undertaking that he would publish revised proposals before Christmas.

The current CGT regime means that basic rate taxpayers who have held shares in their employer for at least 2 years are only subject to a 5% CGT charge. The Chancellorís Pre-Budget Report outlined changes that would mean that these employee shareholders would have to pay an additional 13% tax on any gain above 9,200 from April 2008.

ifs ProShare, a not-for-profit membership organisation that seeks to promote the benefits of employee share ownership, argued that this would mean employees who have contributed to the success of their employers are now going to be worse off than under existing legislation whilst non-employee shareholders who have not done so are to have their CGT liabilities substantially reduced (from 40% to 18%).

The changes may discourage medium and long term saving through employee share ownership and could also damage the move towards wider share ownership.

ifs ProShare has therefore submitted a range of proposals to the Treasury as to how the potentially negative impact of such changes can be mitigated.

Fiona Downes, Head of Employee Share Ownership at ifs ProShare, said:

ìA significant minority of Save As You Earn employee shareholders could be negatively affected if the Chancellor does not amend his original proposals for CGT reform.

Our research suggests that 16% of SAYE participants could be worse off, thatís 272,000 employees, many of whom are relatively low earners.

We therefore welcomed the Chancellorís 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 itís important that the Government fully considers all proposals, employee shareholders and employers need an end to this uncertainty as quickly as possible.î