Chancellor Alistair Darling is expected to announce on Thursday that the Government is sticking by its plan to increase capital gains tax to 18 per cent.

He will tell the House of Commons that the Treasury is prepared to offer small and medium size businesses some relief and allowances to ease the pain. 

David Frost, Director General of the British Chambers of Commerce, said after a briefing on the forthcoming announcement that it was clear that the Treasury understood business concerns that the proposed CGT changes announced last October affect entrepreneurs adversely.

He confirmed that there were likely to be targeted measures aimed at certain groups but said he was not expecting the fundamental approach to change.

Frost added that the proposed capital gains tax reforms raise a significant amount of money. The Treasury was originally expecting to raise around £900 million a year by raising capital gains tax (CGT) on business assets held over two years from 10 to 18 per cent. It is thought that the anticipated concessions will decrease this revenue by around £200 million.

"With the public finances under severe pressure we do not believe that the Treasury has much room to manoeuvre. The test will not be the number of initiatives that are announced to stimulate enterprise but by how much the £900 million is expected to fall too. We want a significant cut in the proposed tax, not just smoke and mirrors," Frost said.

Darling's team briefed the CBI and other business organisations this week, ahead of tomorrow's formal announcement.

The Chancellor's capital gain plans have been widely criticised and are believed to have led thousands of business owners to try and sell up before the increase comes into force on 6 April.

Business advisers said that the Government's delay in announcing its final decision has made it near impossible for firms to plan their finances for 2008.  

Related articles

• Small businesses most worried about tax
• MPs criticise capital gains plans
• SMEs increase pressure over capital gains

Related links

• HM Treasury
• British Chambers of Commerce
• CBI

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