Manufacturers Offer Chancellor Solution To Capital Gains Tax Dispute

by Carla Johnson, Investors Offshore.com, London

01 November 2007

EEF, the manufacturers' organisation, has urged the UK's Chancellor of the Exchequer to set out in his next Budget statement a clear, long-term strategy to promote enterprise amongst small and medium size companies (SMEs) in response to the changes to capital gains tax announced in the pre-budget statement.

During a recent meeting, EEF argued that the measure would be damaging for enterprise by rewarding investment in non-business assets, and sends a negative signal at a time when the investment climate, especially for small firms, is set to become more difficult.

EEF also believes that the proposals are not justified on the basis of simplification, as the gains are small compared to the overall administrative burden on business and the scale of the tax rise.

EEF instead proposed a Capital Gains Tax Regime which acknowledged the need to reward longer term investment in business assets over and above non-business assets.

In particular, not only must the principle of risk and reward be restored, EEF believes there is a strong case for targeting small firms on the basis that they are the main generation of employment but face the biggest barriers to financing investment.

Commenting, EEF Director General, Martin Temple, announced that: "Having gone through a period of beneficial changes, over the last twelve months policy has appeared to go in a different direction, especially towards small and medium size companies which are the lifeblood of our economy. "

He continued:

"Government must now take the opportunity to set out a clear, long term strategy for boosting investment in small businesses by looking again at the tax system. In particular, we must send out the signal again that the principle of and, reward for, investment in business is of greater value than investment in non business assets. ""We were pleased that the Chancellor indicated his willingness to work with business to achieve this."

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