Tycoons avoid new tax ruling

Apr 5 2008 by Peter McCusker, The Journal

LORD Sainsbury has joined thousands of wealthy tycoons and company bosses in rushing to take advantage of current capital gains tax (CGT) rules before the controversial new regime kicks in on Sunday.

The Labour peer became one of the many to save tax ahead of Sunday’s deadline, transferring around £340m worth of Sainsbury’s shares – the bulk of his 8% stake – to pay tax at just 10% rather than the incoming flat-rate of 18%.

The change could save the former science minister and supermarket heir around £27m in tax, although he pledged to donate gains to charity.

Fellow supermarket stalwart Sir Ken Morrison also rearranged his £1bn stake in Morrisons to reportedly save around £100m in CGT, alongside countless other similar moves by some of the City’s leading figures. Stock Exchange chief executive Clara Furse and Chrysalis music group founder Chris Wright are also believed to have joined the throng this week with share transfers to their partners.

Away from the stock market, swathes of small business owners are scrambling to sell up and crystallise their capital gains.

Chancellor Alistair Darling’s new CGT rules will bring an end to “taper relief” – a highly unpopular change, given that it has until now allowed companies to pay CGT at a rate as low as 10% on gains from assets held for two years.

From Sunday, this will be scrapped in favour of a flat rate of 18% for gains over £1m, forcing many businesses into a fast track sale to lock-in at the lower rate.

The changes were an attempt to prevent private equity bosses from avoiding tax after last year’s furore over the industry, sparked by comments from one buyout boss that they paid a lower rate of tax than their cleaners. But instead, it is the country’s wider business community that appears to be paying the price, says business lobby group CBI.