CAPITAL GAINS

The rate of tax on capital gains is now 18%, or 28% for higher rate tax-payers.

The rates are a “flat tax” in that there is no inflation adjustment.  So, the inflation adjusted rate of tax on gains increases over time.  Indexation and taper relief were abolished in 2008.  Companies do get indexation on their assets (but the corporation tax rate may be higher than 18%).

In terms of investment planning the 18% rate is generous so consider investing for capital growth.

As a concession, the Government introduced entrepreneur’s relief  - which gives a rate of 10% on £5m (from 23 June 2010) of lifetime gains on disposals of businesses.  The rules are not particularly straightforward and particular care needs to be taken to ensure shareholders have 5% of the company and are employed or listed as Director/Secretary.  Properties used in the business but held privately are also troublesome and no relief may be given if, for example, rent is charged.

For further information or if you have any questions contact Donald Parbrook at Milne Craig on 0141 887 7811 or at donald.parbrook@milnecraig.co.uk.