IR11

9 March 1999

CAPITAL GAINS OF COMPANIES

In the light of responses made during the consultation last year on
the taxation of company gains, the Chancellor proposes no major
changes to the way in which company gains are computed or taxed.
Consultation will, however, continue on various issues raised during
the consultation exercise.

DETAILS

1. In his 1998 Budget, the Chancellor announced a review of the
taxation of the capital gains of companies. He invited comments which
took account of the Government's objectives to have a tax system
which encourages investment, promotes enterprise and is fair to all.

2. The Chancellor was grateful to all who responded. In the light of
those responses, and the Government's own objectives, he has decided
not to make any major changes to the way in which company gains are
computed or taxed. In particular, he proposes to retain indexation
allowance and not to introduce a taper relief for corporate gains.
The rationale for introducing taper relief for individuals and trusts
is considered not appropriate for companies.

3. However, there are a number of issues that arose from the
consultation which the Chancellor wishes to consider further to
determine whether any changes might be appropriate. These include:
whether or not the capital gains group rules need to be updated in
the light of business becoming increasingly international; the use of
losses within a capital gains group; the gains arising from the sales
of subsidiaries.

4. The Chancellor has therefore asked the Treasury and the Inland
Revenue to enter into discussions with interested parties with a view
to discussing further possible changes. Any changes would have to be
made in such a way that preserves and protects the existing tax base.
The Inland Revenue will be writing to interested parties shortly with
a view to setting up meetings.

NOTES FOR EDITORS

1. Companies do not pay capital gains tax as their gains are charged
to corporation tax.

2. The review of company gains was announced in Budget day press
release Inland Revenue 22: Capital Gains of Companies: Further Review
dated 17 March 1998.

INLAND REVENUE PRESS OFFICE 
Media enquiries to: 0171 438 6692/6706/7327 
(Out of hours: 0860 359544)

Non-media enquiries to: 0171 438 6420/6425 (Office hours only)

Inland Revenue information is on the Internet:
www.inlandrevenue.gov.uk

# = pounds sterling