TAX NEWS - June 2010

Britain Tax: Lord Alan Sugar slams coalition plan to hike CGT

Former enterprise tsar Lord Alan Sugar has launched a stinging attack on the proposed increase in CGT, claiming it will have a "devastating effect" on businesses.

Opening a debate in the House of Lords this morning, Sugar said the planned hike will have a detrimental impact on those setting up and selling businesses and backed the introduction of a taper relief system.

The face of television show The Apprentice told the Lords an increase in CGT - as set out by the coalition Government - was "alien" to Tory policy.

"But I quickly realised it was the brainchild of the new business secretary and no doubt part of the (coalition Government's) pre-nuptial agreement."

He added subsequent "back-peddling" by Prime Minster David Cameron and comments from the business secretary the current CGT regime will lead to large-scale tax avoidance left him in a state of confusion.

The Prime Minister today told the BBC exploitation of the capital gains tax system is costing the Treasury £1bn a year and said stopping tax evasion justified plans to raise CGT.

Labour's former enterprise champion said he had conducted his own research into possible tax avoidance schemes and only found one anomaly involving private equity funds which would be simple to eliminate.

"By all means curtail people who think up avoidance ideas but let genuine people who want to do business prosper," he said.

Sugar told the House of Lords a hike in CGT will have a "devastating impact" on those setting up and selling businesses and current entrepreneur relief falls well short.

He welcomed the introduction of a taper relief system which would give some people low rates on a par with the current 18% rate.

"People should not be punished if they have held assets for a long-time," he said.

The peer also said there needs to be a clearer separation between business and non-business assets.

"There should be a difference between fast-buck merchants and those who invest sensibly."

And he warned of possible unwanted ramifications of a CGT hike.

"I would hate to think an increase in capital gains tax would induce a fire sale of assets and depress certain market sectors."