Friday, August 01, 2008

The Old Grey Whistle Tax

You have to love the Internet. Gone are the days where articles can be written and it's only Mr Giles Farquarson-Smyth who can make a comment in a long-winded letter to the Times.

Simple and straight to the point are the rules of today's commentators. My favourite of the day was from Mr Fredrick Davies commenting on an article about Labour's tax hikes.

"I sometimes wonder what those idiots in the Inland Revenue are thinking; I mean, come on, you cannot be THAT stupid and be able to hold a job, can you?"


What was this precision perfect insult about? Labour's complete cock up of the capital gains tax rules, an old favourite of ours.

You remember this farce. Darling decides to make poster boys of private equity millionaires ripping off tax payers by having carried interest in their funds which has them taxed at only 10%. Darling says he is having none of that and creates a flat rate of 18%.

Realising he has now just almost doubled the tax for hard working people who have been running a business for years, he brings in the 'Entrepreneurs Relief' which is a one time £1mn taxed at 10%.

Fair enough, but in practice this is now causing the golf courses of Britain to be deserted of the grey haired retirees who have built their businesses, paid their dues and moved on to well deserved golfing and gardening.

These once great business owners had happily settled into retirement, leaving the running of their enterprises to the next generation. But they had retained their shares as an investment, for old time's sake.

Enter Darling's capital gains Entrepreneur's Relief - and all hell breaks loose.

The more pessimistic predictions suggest that our grey heroes will leave the 19th hole a little worse for wear, preparing themselves to go back to their companies and ask to be reinstated.

The reason being is that the new tax relief comes with some strict rules (no surprise there then), including one that requires the entrepreneur to own at least 5 per cent of the shares and be either an office holder (i.e. a director) or an employee of the business if they want to claim the relief when the shares are finally sold.

Basically leaving the oldies holding a fat tax demand if they sell their shares without complying with these rules. Having already taken a hit by the retrospective loss of indexation (which inflation-proofed gains before 1997), they are unlikely to be in the mood to help the Chancellor out any further.

All this against the backdrop of falling stock market, falling houses prices and a potential recession. Is there any wonder that Gordon Brown has the lowest approval numbers in history?

The only 'Entrepreneur Relief' on the horizon is the impending crushing of the Labour Party in the next general election. I just hope the next mob take a good look at the indirect taxation scams that have been thrust upon the people of Britain and sweep them aside.

I fear, however, that David Cameron is Tony Blair in a different party, rather than Maggie Thatcher in a suit.

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