Mike Yiannis: Increase CGT please Darling

Mar 19 2010 By Mike Yiannis

For the first time in many a year, I am very interested in the Chancellor’s Budget.

Let’s face it, until recent times it was a pretty boring affair. Loads of waffle then big numbers about spending this, budget that – pretty meaningless stuff to the layman. Yes, tax on petrol would go up, as would booze and ciggies. And stealth taxes would be guaranteed with the odd symbolic cut in direct taxes to compensate.

We all expected this and there have been few surprises sprung on us.

It’s election year and on March 24, Darling gives his final Budget as Chancellor (ever?). He’s already managing expectations by saying he will not be announcing any major spending cuts (as that will of course cost too many votes) but interestingly he is silent on tax increases.

And there is one tax that I am paranoid about – Capital Gains Tax (CGT). It is simply too low – for business owners selling shares in their companies, the first million could be taxed as low as 10 per cent and the rest 18 per cent, for other gains it is a flat 18 per cent. I’ve not come across anyone who does not believe CGT will rise.

The question is not if, but when? And the timing is my concern. Surely he can’t spring it on us and increase CGT on Wednesday?

The world of corporate financiers, lawyers and accountants would not be happy. We have been as battered and bruised as most sectors by the recession and we need a boost.

Increasing CGT with immediate effect will jeopardise current deals where vendors are selling to cash in whilst rates are still low. And tax advisers won’t have enough time to advise.

So Darling, what’s the rush?

The £170 billion deficit is here for a few years yet and a quick CGT hike won’t touch the sides.

OK, let’s accept CGT is going up, indeed tell us next Wednesday. But give us at least 12 months?

For us deal doers, it will provide a much need mini-boom – and that will help boost tax receipts too.

We will have 12 months of frantic deal activity as businesses are bought and sold before the hike.

And then there’s the avoidance schemes which will no doubt flood the market as the tax advisers step up a gear to fight the hike. Oh happy times. So, come on Darling, do us all a favour – put us out our misery and do the inevitable. But give us time to get used to it - it will be worth your while, honest.

* Mike Yiannis is founder and MD of Odyssey Corporate Finance, an independent corporate finance advisory and investment boutique