Clause 45 - Taper relief: holding period for business assets
Finance Bill
12:30 pm
Ms Ruth Kelly (Economic Secretary, HM Treasury; Bolton West, Labour)
The chart speaks for itself and hon. Members can refer to it at their leisure.
The right hon. Member for Fylde asked about publishing an economic analysis of the impact of the provision. The Inland Revenue is committed to evaluating the impact of the taper relief reforms, but time has been too short to obtain concrete information to analyse. The Revenue continues to draw on the experience of a standing consultative review group of outside interests. It is consulted whenever practical on reforms to taper relief and other suggested changes.
On some of the more specific points raised, the hon. Member for Arundel and South Downs suggested that we should consider reducing capital gains relief to zero. The effective tax rate on gains for higher rate taxpayers is now 10 per cent. after two years. I would argue strongly that that not only provides a real incentive to invest in business and encourage share ownership by employees, but it is not clear that making the taper more generous would promote additional cost-effective activity and improved investment performance. I also believe that individuals who make and realise substantial gains should be liable to some tax on those gains.
The hon. Gentleman suggested that non-business assets can be contrived to have a gain of zero, but the indexation allowance applies only to April 1998, which is a matter of contention in the Committee. After that, it does not apply to business assets or non-business assets, so his point is neither practical nor significant.