Having slapped down business demands last week for a U-turn on his capital gains tax reforms, the pressure on the Chancellor of the Exchequer, Alistair Darling, to reconsider continues to mount.

And there may be a chink of light at the end of the tunnel. Having acknowledged the near-unanimous opposition to his proposals, particularly his decision to scrap the 10 per cent rate for business assets held for two years or more, the Chancellor may still be open to persuasion.

For instance, Lord Sainsbury, the former science minister, yesterday told a group of venture capitalists that a reprieve from the new regime might be possible, if they could make a case for early stage investors in businesses. Even Labour MPs such as George Mudie, a leading Brownite, have expressed dismay at the lack of consultation.

All of which begs the question, as to why Mr Darling embarked on this wholesale reform of CGT without better advice on its implications for venture capitalists, small businesses and employees in SAYE schemes.

All these groups will suffer under the new regime, when the original target was the carried interest of private equity investors who pay less tax than their cleaners.
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The cack handed handling of this whole affair and the failure to consult beggars belief, particularly when the Prime Minister has always presented himself as a supporter and proponent of venture capitalism.

Let’s hope sense prevails and the necessary tweaks are made to the new regime so as introduce greater simplification, without hurting the very people who are building the businesses of the future on which our economy depends.

What’s the betting that some, or all, of the capital gains tax changes announced in the pre budget report will be withdrawn, given the furore that these poorly thought out proposals have caused?

Alistair Darling has managed to upset just about everyone, except the very individuals in the private equity industry who were supposed to be the target of his changes.

The private equity chappies have got off relatively lightly, whereas ‘the little people’ (as millionaireress, Leona Helmsley, would say) who have invested iin SAYE share option schemes, Enterprise Management Initiatives, AIM shares and individuals with holiday home lettings, are all potential losers under the flat rate regime of 18 per cent CGT and the axing of taper relief..

Given the former Chancellor’s propensity for spectacular and unexpected U-turns, I see no reason why his successor shouldn’t do likewise.

George Osborne’s inheritance tax proposals at the Tory party conference this week were a master stroke and worthy of consideration.

At a stroke, he delivered hope to millions of middle England households, who under the current rules could face punitive inheritance tax bills in the future, due to rampant increases in house prices and personal wealth, and a tax exempt threshold which has failed to keep pace withb this inflation.

Supporters of inheritance tax (yes, they do exist) argue that only around 37,000 estates currently pay the tax. But that misses the point. It is the effect of double digit house price inflation over much of the last decade and the increase in general household wealth which has sucked millions of estates into a potential tax liability in the future that counts.

According to research by Scottish Widows, under the current inheritance tax threshold of £300,000, almost four in 10, or 9.4 million homeowners will have an estate liable for IHT on their death.

This is because almost 4.8 million homeowners have properties worth more than £300,000 and when total household wealth is taken into account, a further 4.5 million households would be liable to pay IHT.

In fact, average household wealth stood at £269,117 in April 2007, only 11 per cent under the £300,000 threshold.

Even though the latter is set to rise to £350,000 by 2010 (assuming that Labour is still in power), this will leave many people with a problem if house prices and household wealth continue to rise.

All of which makes the proposed lifting of the threshold under Osborne’s proposals so eminently sensible, providing that his estimates of the amount of tax that can be raised from wealthy ‘non doms’ add up. But that’s another story….