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Flat-rate capital gains tax is stifling enterprise

The 18 per cent flat rate of capital gains tax is choking enterprise by reducing the incentives for investing in private companies, warns the Enterprise Investment Scheme Association.

In response to the Government’s consultation into the accessibility of the EIS, director Martin Sherwood attacks the CGT reform brought in by Chancellor Alistair Darling in this year’s Budget.

He says: “The flat rate change is having a dilutive effect on the tax benefits offered in EIS.

“Given the period for application of funds, it will be another two to two and a half years until we see the real effect on the system.”

Sherwood believes that EIS should be given CGT deferral and says an increase in income tax relief to 30 per cent would be “adequate compensation” and bring funds in line with venture capital trusts.

He forecasts dramatically lower figures for 2007/08.

Sherwood says: “You have got to water the plant before it dies. I am optimistic that the Government will reach a result that is right for everyone.”

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