Business bosses petition Darling over tax changes

Four heavyweight organisations say that Alistair Darling's proposals to abolish 'taper relief' could seriously damage our entrepreneurial culture.

Bosses of the four, including the Confederation of British Industry, have written a joint letter to Darling urging him to suspend his plans and work with them towards a better solution.

They argue the tax changes, announced last week in the pre-Budget report, could damage the whole economy.

The outcry over the reforms came as Shadow Chancellor George Osborne pledged to reverse Labour's small business tax rise announced at the last budget and said he was 'looking carefully' at what changes would be needed to capital gains tax.

"We will continue to fight for a better deal for Britain's hardworking investors and entrepreneurs," says Osborne in an article in today's Daily Mail.

"The Chancellor's complicated changes to inheritance tax aren't nearly as generous to families as our plans.

"Many families will be no better off at all."

He also says that 'hardworking people who save through share ownership schemes will also be hit hard.'

Among other Tory proposals, says Osborne, is a commitment to lifting nine out of ten first-time buyers out of Labour's stamp duty net.

Following a storm over the huge profits raked in by private equity bosses, Darling announced a flat capital gains tax rate of 18 per cent would come into force next April.

This will mean that buyout bosses may find their tax bill up - but so too will entrepreneurs when they come to sell out.

As well as the CBI, the group of business organisations comprise the British Chambers of Commerce, the Federation of Small Businesses and the Institute of Directors.

They said in their letter: "Owners of small enterprises who have toiled over years to build up an asset are now faced with selling up before April or facing a substantial dent to their investment."

The abolishment of taper relief, introduced by Darling's predecessor Gordon Brown, means the 10pc small business owners tend to pay on their capital gains will now effectively rise to 18 per cent.

The 1.7million employees in company share schemes will also face a sharp rise in their tax payments when they come to sell their shares.

The four business bodies argued that staff now face a 'serious disincentive' to taking part in company share schemes.

They said that the abolition of capital gains tax relief, coming hot on the heels of the hike in small business corporation tax, means the Government's decadelong effort to create a pro-enterprise agenda 'has been put into reverse gear'.

They plan to meet Darling to try to understand why he made the decision - which will swell Government coffers by £2billion by 2011.

They want him to find an alternative way that 'averts serious damage to this country's entrepreneurial culture'.

They wrote: "We urge you to pause, suspend your decision and enter into urgent and detailed discussions with the key business organisations to resolve this situation."