Darling discusses tax change with firms

Britain's four biggest business organisations have been lobbying the chancellor over planned changes to capital gains tax.

Alistair Darling was on Monday holding talks in the Treasury with representatives of the CBI, British Chambers of Commerce, Institute of Directors and Federation of Small Businesses.

The meeting comes in response to an open letter to him last week from the groups which warned that the changes will "undermine enterprise" in the UK.

In his pre-Budget report earlier this month Darling unexpectedly announced the abolition of taper relief on the tax, which will create a single rate of 18 per cent.

He said he wanted to simplify the tax on the sale of assets, which has been used in the private equity sector to limit tax payments.

But the campaigners complain that the move will also raise taxes on small businesses and employee share-ownership schemes, which currently benefit from a 10 per cent tax rate.

"We want to see if we can't help the chancellor find a solution which meets the needs of government but doesn't harm business," said an FSB spokesman.

However last week the chancellor appeared to be digging his heals in over the change, which is due to come into force next April.

"It is not a tax on entrepreneurship," he claimed. "It was striking that nearly 75 per cent of those who pay CGT need an accountant to tell them how to calculate their liability.

"That tells you it is quite complex, so going for a simplified rate is hugely beneficial. If you look at the rate internationally, it is competitive."

"The goal was to narrow the differential between taxes on income and capital," he added. "I wanted to keep it as low as possible."

Darling also denies that up to 10 million employees will have to pay tax on their company shares, saying that most will not exceed the £9,000 annual tax free allowance.