Pre-budget U-turn?

25 October 2007
Detractors of the government proposal to abolish taper
relief on capital gains tax were provided with a sliver of hope today, when the Chancellor repeatedly refused to rule out a policy u-turn.

In an address to the Treasury Select Committee regarding October's Pre-Budget Report, Alistair Darling repeatedly insisted that simplification of the tax system was a positive step, and that he was ‘very enthusiastic’ about it. He also stated that he was very wary about reintroducing greater complexity into the capital gains tax set-up.

On three occasions, however, Darling was offered the chance to rule out a fundamental change in policy once and for all, but each time he declined to do so. He gave a further
lifeline to business by offering to work with business leaders on the ‘detail’ of the capital gains policy.

The Chancellor’s appearance before the committee is likely to increase hopes that the government may still make major compromises on a proposal that has, to date, proved exceedingly unpopular.

When responding to a direct question, Darling also disclosed that the proposed abolition of taper relief will net the government more than £6 billion next year – this is the first time the cost of the relief has been revealed.

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