CGT concession dropped for small firms

Ministers are to strip small firms of a longstanding concession which has allowed them to pay capital gains tax - rather than income tax - on the proceeds of the sale of a business.

CGT is charged at 18% to 28% while the higher rate of income tax ranges from 40% to 50%.

Until now the shareholders in such firms have enjoyed a special arrangement under which they have paid only CGT on the proceeds instead of income tax.

This ‘concession' is now being put on a statutory basis, but there will be a £25,000 ceiling on the amount subject to CGT. Sums above this will be subject to income tax at the shareholder's top rate, according to the Daily Mail.

It is possible to avoid this tax only by paying for a formal winding-up by an insolvency practitioner or other professional, which the Revenue says could cost £7,500 for a small business whose affairs are not complicated.