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Sanger is the original architect of the capital gains tax (CGT) taper relief scheme.

The FSB has submitted a comprehensive report to the Chancellor, who is expected to make a statement on CGT next week. The FSB’s proposals would mitigate the damage of the plan to scrap taper relief on CGT in April 2008, which has enraged the UK’s 4.5 million-strong small business community.

The UK’s biggest business organisation argued that the country’s entrepreneurial culture would be damaged and that small business owners planning to sell their businesses to pay for their retirement would see their tax bills rocket overnight.

The FSB has proposed a new Entrepreneurs’ Relief, which would apply to owner-managers of small businesses as well as business angels. The proposals would provide a 50 per cent relief on capital gains up to a limit of £750,000, which equates to an effective tax rate of 9 percent.

The Federation said that they would also make it easy to identify who would qualify for the relief and encourage serial entrepreneurship. Entrepreneurs would be persuaded from leaving the UK, which could in turn increase the overall tax take from them. The proposals would aim to simplify the capital gains tax system in line with the Chancellor’s intentions.

John Wright, FSB National Chairman, said that he was pleased the Chancellor had acknowledged the outrage in the small business community about the plans to abolish taper relief on CGT. He welcomed the opportunity to put forward alternatives.

Wright added that thousands of small business owners and investors in new business ideas would have suffered from the Chancellor’s decision.

“Our proposals, produced in consultation with the UK’s leading expert on CGT, would protect small business owners that have worked hard over many years to build up a business and want to sell it to pay for their retirement. They would also ensure that the investment in new business ideas that underpins the future of the UK economy could be maintained," he concluded.

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Related links

• Federation of Small Businesses
• HM Treasury