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CGT change a 'risk' to employees and investment

As many as 200,000 vital business investors could be affected by a significant rise in capital gains tax, the Institute of Directors (IoD) has argued.

Should the government go ahead with mooted plans to raise the rate of CGT for non-business assets so that it is closer to the higher rates of income tax, the IoD has argued that small business investors and employees with company shares could be hit and, with them, longer-term business investment.

According to figures from HM Revenue and Customs, the IoD said that 230,000 individuals a year have gains exceeding the annual exemption.

Half of them have modest gains of up to £25,000, while two thirds of gains are made on shares and securities, assets which, the IoD continued, represent important investment in business.

People likely to be affected include those with small shareholdings in businesses in which they work, and those who have chosen to invest in shares in order to provide for their retirement.

Miles Templeman, director general of the IoD, commented: "The government would be sensible to note the strength of feeling on this issue in the business community and among ordinary investors.

"The more we look at the CGT increase, the more we can see that it will indirectly penalise those who want to live in a thriving economy, because it will deter enterprise and thereby damage growth."

Mr Templeman added that a generous taper relief would support long-term investment.

If that is not introduced, then a broad definition of the business assets that will be protected from the increase, including all shares that are held by directors and employees, will be vital.