CGT Chaos Impacting Small Plumbing & Heating Companies
Many plumbers and heating engineers that are owner-managers of their plumbing & heating companies were left confused and disappointed with the latest revision to the capital gains tax (CGT) published by Alistair Darling, the Chancellor of the Exchequer on 25th January 2008. The new tax regime will become effective in April 2008.
Thousands of ordinary investors will face higher taxes on their profit, though small companies, such as plumbers and heating engineers will benefit from the revised capital gains tax. After immense pressure from organisations representing small companies, the government has announced that the first £1 million of any gains would be taxed at 10 per cent, rather than 18 per cent. The remainder would be taxed as planned at the higher 18% rate.
Owners of plumbing and heating companies have voiced mixed reaction, combing some relief and yet other expressed disappointment, that the new tax has increased by 80% compared to the previously used levels. The government has introduced the taper relief mechanism in 1997 to encourage business people to set up companies (such as plumbers to set up their own plumbing & heating company), and invigorate the economy. According to the current scheme, such plumber owners of plumbing and heating companies pay only 10% tax on capital gains if they owned the plumbing and heating company for more than two years.
Many plumbers we interviewed have expressed frustration that their efforts into building their plumbing and heating company over many years will now attract higher tax. Most of the interviewed plumbers expect to use the proceeds of the sale of the company as their pension, and now they face higher 80% more taxes above the allowance. In addition, because the allowance is a life time allowance, some entrepreneurial plumbers will further be hurt by increased tax on their value creation scheme if they have created and sold more than one company.
This page has been written with contributions from experienced plumbers from Northamptonshire and plumbing and heating engineers from Romford. Several of the company's plumbers from Surrey have worked on similar issues as well as some of our qualified plumbers from Clapham and our Milton Keynes Gas Safe engineers.
