Crazy changes to CGT

So now we have Darling's new CGT proposals. Basically he's amended his proposals so that the first £1m of any gain in your lifetime is taxed at 10% (as before) rather than 18% (as proposed). But, apart from the lifetime limit (more later), there are other limitations. Like you have to hold more than 5% of the equity (and voting rights) in a qualifying private company and be a director or employee. Very, very few employee shareholders will therefore qualify.

Bluntly, I think the whole situation is crazy. As I have said before, I campaigned long and hard in 1996-1998, with Kenneth Clarke and then Gordon Brown, to get the CGT rate reduced. I publicly said that I thought the 10% rate after 2 years was one of, if not THE, most 'entrepreneur-friendly' measures introduced by any Government. Before that, many of my friends moved abroad to avoid tax when they sold the businesses that they had worked a lifetime to build up. I, myself, benefited from this new CGT regime in 2000 and again in 2006. But so did hundreds of people who had worked for Richard Holway Ltd and Ovum.

Since then I have invested some of the proceeds in AIM companies, start-up private companies and new ventures - all with the expectation of a 10% CGT rate when I eventually sold up.

But I've used up my £1m lifetime allowance. So I guess I'll have to pay 18% on anything I may make for now on. Even if I hadn't (or the rather vague details of the new CGT regime means that my "lifetime' starts again from zero on 6th Apr 08), my AIM investments are not over 5% . I'm reluctant to become either a director or employee in the private companies in which I have invested. I prefer to be a 'mentor'. So none of the things I do as a 'serial entrepreneur' qualify!

So I might as well invest in property and short term stock exchange investments. What an absolutely crazy situation!

Even if I hadn't used up my £1m lifetime allowance, many of the very bright entrepreneurs I know will certainly be hoping for a much bigger gain than £1m. I am absolutely certain that many will now consider moving abroad, as 18% is really worth saving whereas 10% was both fair and perhaps not worth all the upheaval and accountants bills to avoid! As before, surely it was better to raise 10% than nothing at all?

Of course, this all applies to employee shareholders with SAYE schemes, share options and smaller shareholdings. They are all similarly penalised with an 18% CGT rate.

When Darling announced the original scheme back in Oct 07, it looked as if it had been made up 'on-the-back-of-a-fag-packet' as a means of raising the funds required to produce a counter-measure for the Tories' very popular Inheritance Tax proposals. All this because a General Election was in the offing.

I always thought that Ministers had enormous departments who worked on the details of such Budget proposals and went through all the resulting consequences? Clearly (given the 'U-turn' yesterday) this didn't happen and "incompetence" - the 'term of the moment' - seems an apt description.

I really am not a political animal, but my confidence and trust in the economic abilities of the current Government have evaporated.