The Chancellor, Alistair Darling, made his long awaited announcement on the Capital Gains Tax ("CGT") reform. The announcement included the introduction of a new relief ("entrepreneur's relief") which has been pressed for by professional firms and business leaders.

The headline news is that the 18% capital gains tax rate will be introduced from 6 April 2008, and that entrepreneurs relief will result in an effective tax rate of 10% on the first £1M of qualifying gains of an individuals lifetime ("lifetime limit").

Draft legislation on the amendments to CGT has been published (but not the draft legislation on entrepreneur's relief).

Entrepreneur's relief will apply to gains arising on disposals, by way of sale or cessation of the whole or part of trading businesses, or shares in qualifying trading companies where an officer or an  employee owns and votes over 5% of the shares.

There is no age limit for the relief which is available where the conditions are met for one year. 'Trading' will have the same meaning/tests as for the current Business Asset Taper Relief, although commercial and residential property letting is specifically excluded except for furnished holiday lets.

In case you're thinking that the entrepreneur's relief has a familiar but distant feel, HMRC's press release states that '... the conditions for the new relief will be based broadly on the CGT retirement relief that was phased out between 1998 and 2003...".

Further clarification will be needed on entrepreneur's relief and this will hopefully be available when this legislation is published.

It would appear that some trustees are excluded and it is not completely clear when your lifetime limit commences.

Martin Muirhead, Partner, at Kingston Smith LLP said "The new measures could take us back to the days where entrepreneurs left the UK with their capital and investments to avoid paying higher rates of CGT".

The new rules will be effective from 6 April 2008, which gives a small window of opportunity for individuals, particularly those with gains attracting BATR over £1M, to benefit from the current Business Asset Taper Relief.

For those holding assets which currently do not qualify for Business Asset Taper Relief  such as buy to lets residential properties, shares in quoted companies, works of art etc they should consider  waiting until after 5th April 2008 before realising gains.

With the proposed changes to the Non Domiciled and Residence rules with effect from 5 April 2008 all resident, Domiciled and Non Domiciled individuals should review their tax position in the light of these proposals.