A major reform of Capital Gains Tax formed the centrepiece of Gordon Brown's Budget on Tuesday.

Capital Gains Tax Retirement Relief is to be phased out over a five-year period, but in its place there is to be taper relief to reward longer-term investment.

The full benefit of the taper will accrue after ten years of ownership, when for higher- rate taxpayers the effective rate of tax on capital gains will fall to ten per cent for business assets and 24 per cent for other assets.

The tax advantages of 'bed and breakfasting' are removed with effect from 17 March 1998, by changing the share identification rules Capital Gains Tax purposes. From April 6, 1998, shares sold and repurchased within a 30-day period will be matched, so that the gain or loss accrued to the data of sale will not be treated as realised.

For small and medium-sized businesses, expenditure on machinery or plant in the 12 months ending July 1, 1999, will qualify for first-year allowances of 40 per cent. This is an extension of the relief introduced last July.

Income tax rates for 1998/99 will eb unchanged. MIRAS has survived, and the expected assault on employee car benefits did not materialise. Final details for the new Individual Savings Account (ISA) were announced and include some changes to the original proposals which came in for so much criticism.

Looking ahead the Chancellor has given an advance indication of a major package of tax and benefits reform with the introduction in October 1999 of the Working Families Tax Credit, a measure designed to help families on lower incomes.

Paul Byrne is regional managing partner at Baker Tilly, based in Bradford.

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