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Abolition of indexation and taper reliefs from capital gains tax - what to do next

19 February 2008

As you will have seen, the Government has announced that from 6 April 2008 both taper relief and indexation relief from capital gains tax will be abolished for individuals, trustees and partnerships.

The result is that in place of an effective tax rate as low as 10 there will be a single flat rate of 18.

In a fresh complication, a so-called "entrepreneurs relief" will allow the first £1m of gains over a lifetime to be subject to a 10 tax rate, provided that the gains are on assets of a trade, or shares in a trading company held by someone who has been an officer or employee of the company for at least a year and who holds at least 5 of shares (and of the voting rights) in the company; the details of this proposal have yet to be published.

If you have assets that have benefited from business assets taper relief - typically assets used in a trade, premises let to a trading company, or shares or securities in an unlisted trading company - or if you have assets acquired before 1998 and in respect of which substantial indexation relief has accrued - you may want to consider "banking" taper relief, or indexation relief, accrued to date by a disposal of your asset prior to the change in law. In some cases indexation relief can be "banked" simply and on a tax free basis - but professional advice should be sought first as none of the solutions are free of risk.

If you would like any advice from us on your individual position, please call Andrew Noble of our Tax team or your usual Browne Jacobson contact.

If you would like us to provide any information to your regular tax adviser, for example with details of deals you have done (and in particular assets such a loan notes or earnout rights acquired on a company sale), or assistance in putting in place any trust planning your regular adviser may recommend (and making sure it ties in with your overall estate planning), please let us know.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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