Higher bills for business as tax relief is scrapped

Businesses and buy-to-let landlords face higher bills from the taxman after the Chancellor scrapped corporation tax relief on capital gains linked to ­inflation, to raise more than half a billion pounds a year.

Companies do not currently pay corporation tax on profits from capital gains driven by inflation. The relief meant businesses were only taxed on real gains and its abolition was today labelled “a significant tax increase for business”.

The burden is expected to match the benefit to business from changes to how business rates bills are calculated and act as an effective 
corporation tax increase, countering cuts to the headline rate.

The Treasury said that, from next year, the business capital gains regime will be brought into line with the rules for individuals. Mr Hammond’s move will mostly affect sales of property, ­machinery and shares. Tax specialists claimed it will discourage the use of companies as investment vehicles, particularly by big buy-to-let landlords.

Ray Abercromby, of accountants Smith & Williamson, said: “It could be the beginning of an attack on assets held in companies. Recent buy-to-let reforms have resulted in a more commercial housing industry with many of the smaller holders leaving the market and larger holders incorporating.”