Capital gains loophole is closed

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The Independent Online

The Chancellor , who usually prides himself on promoting enterprise, has delivered a blow to some of the country's wealthiest entrepreneurs with a crackdown on tax avoidance, expected to net about £175m by the end of the 2007-08 financial year.

The Chancellor , who usually prides himself on promoting enterprise, has delivered a blow to some of the country's wealthiest entrepreneurs with a crackdown on tax avoidance, expected to net about £175m by the end of the 2007-08 financial year.

For several years, rich individuals have been able to avoid paying capital gains tax on the sale of their business by moving to countries that do not impose the tax for at least five years. However, some have moved back to Britain within five years claiming that - because of the double tax agreements - they have met whatever tax liabilities they had in the other country.

The Treasury is proposing to close that loophole by saying that having been resident in another country where CGT is not payable does not prevent the tax being payable on the entrepreneur's return to the UK.

The detail of how that will operate is not yet clear but Chris Maddock, tax partner with BDO Stoy Hayward, said one option was that the Inland Revenue could introduce a system of credits, so that any CGT payable on the entrepreneur's return could be reduced by the amount that they have paid while abroad.

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