Gordon Brown Challenged Over CGT Loophole

by Jason Gorringe, Tax-News.com, London

11 December 2001

It looks like Chancellor Gordon Brown may be in for an uncomfortable time of it later today as he faces challenges from a Treasury Select Committee over changes to Capital Gains Tax taper relief on business assets.

One of the country's leading tax lawyers has accused the Chancellor of inadvertently creating a situation in which there are significant incentives for the country's wealthier citizens to evade taxes, and warned that there could be a £2 billion hole in Treasury figures as a result.

In his pre-budget report, Gordon Brown announced new tax breaks for employees and investors on gains made from business assets, announcing that the effective CGT rate for higher rate taxpayers on business assets held for one year will fall to 20%, further decreasing to 10% after two years.

However, Edward Troup, a partner at Simmons & Simmons, and one of the United Kingdom's top tax lawyers, believes that this will create a situation in which thousands of taxpayers will find ways to classify earnings as capital gains, rather than income. Mr Troup condemned the planned measures at an earlier Select Committee meeting, saying that the Chancellor had 'gone too far in a very complicated way.'

'He has made a dog's breakfast of it,' he added. 'We have got a tax which is neither simple nor, I think, very sensible.'

David Laws, a Liberal Democrat and fellow member of the Committee also stated his opposition to the Chancellor's proposals, and announced in The Times on Monday that he intended to question Mr Brown closely, slamming the changes as: 'yet another example of the Chancellor's meddlesome, tinkering approach to tax policy badly backfiring.'

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