The government is under huge pressure to change the aspects of the taxation system that allow those who head up private-equity buyouts to pay little or no tax, Times Reports.
One reform that Darling is considering is a change to the terms of business-taper relief. Rather than the tax rate dropping to 10 percent after two years, an investment would have to be held for five years to qualify for full taper relief.
UHY Hacker Young, an accountancy firm, believes such a move would cost investors with holdings in AIM-listed companies 1.4 billion in extra tax over three years.
“The AIM market is at risk of being seriously damaged if it is caught up in any changes made to taper relief,” says Derek Murphy at UHY Hacker Young. “The government must not overlook the fact that one of the reasons why AIM has become the world’s premier market for smaller companies is the tax incentives offered to investors who hold shares for two years.”
Darling is expected to announce the first details of his planned changes in October’s prebudget report.