17 January 2008
17 January 2008
Jamie Matheson, Executive Chairman of Brewin Dolphin Holdings plc, the largest independent private client investment manager in the UK, has today written to the Chancellor of the Exchequer, Alistair Darling, to ask him to provide some clarity around the Government’s proposed removal of Business Asset Taper Relief for Capital Gains Tax (CGT).
The text of Mr. Matheson’s letter is attached to this press release.
Mr. Matheson commented today,
“I wrote to the Chancellor out of sheer frustration that the situation around CGT is still unclear. Our clients are desperate for advice ahead of the financial year end but we, as the largest private client adviser in the UK, are completely hamstrung because we do not know what the situation will be after 5 April 2008. The law makes it clear that we must give Best Advice based on the facts and figures available to us but we cannot do this at present because of the Treasury’s lack of clarity about what they intend to do.”
Martin Payne, Director of Brewin Dolphin in Leeds added “Normally we would have started the review of all our clients CGT positions in October and so by this late stage we may not be able to do all the necessary calculations in time. We are very relieved that our Chairman has raised the matter and any response from the Chancellor cannot come soon enough.”
Enquiries
Charlotte Black
0845 213 3331
charlotte.black@brewin.co.uk
George Cazenove
Citigate Dewe Rogerson
020 7638 9571
Notes to editors
Brewin Dolphin Limited (“BD”) is the principal operating company of Brewin Dolphin Holdings PLC which is listed on the London Stock Exchange. BD is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange.
BD is the largest independent private client investment manager in the UK. The Group manages £21.6 billion of funds for over 120,000 clients, and of this £10.7 billion is on a discretionary basis. BD has 39 offices and is corporate adviser to 131 corporate and 100 institutional clients. Brewin Dolphin Investment Banking was voted AIM Broker of the Year 2007.
The Group provides complete investment management for private investors, charities and pension funds and trades as:
Brewin Dolphin in England, Wales and the Channel Islands
Bell Lawrie in Scotland and Northern Ireland
Stocktrade is the BD Execution-Only division. www.stocktrade.co.uk
Text of Letter from Mr. Matheson to Alistair Darling
from Jamie Matheson
Executive Chairman
16 th January 2008
Rt. Hon Alistair Darling MP
Chancellor of the Exchequer
H.M. Treasury
1 Horse Guards Road
London
SW1A 2HQ
CGT – Removal of Business Asset Taper Relief and implications for the Market
Brewin Dolphin is the largest independent private client investment manager in the UK with £21 billion under management on behalf of over 120,000 private investors; we are also Corporate Finance adviser to 131 smaller quoted companies, including 63 companies listed on the AIM. We advise our corporate and private clients from 39 offices spread throughout the UK and consequently have considerable expertise and a broad geographical view of investment business for small investors and smaller companies throughout the country.
Best Advice
Further to my letter to you of 30th October 2007 and as my colleague Charlotte Black expressed to you personally yesterday, we are becoming increasingly anxious about how to advise our clients regarding CGT. As you will be aware we are quite properly required to give Best Advice based on the all the facts and information available and with only eleven weeks (including Easter) before the end of the tax year, there remains a significant piece of information missing since you announced your review of the Capital Gains proposals you made in the PBR. Both our Corporate and Private clients are continually asking us for our recommendations of the action they should take before 5th April and we are seriously concerned that we will not be able to complete all the necessary calculations and satisfy our statutory obligations on their behalf, in the very little time we have left. We would urge you therefore to suspend implementation of the new CGT regime until the following fiscal year in 2009.
Market liquidity
As corporate adviser to 131 smaller quoted companies we are also deeply concerned about the possibility of a false market being created by the volume of share sales which we anticipate in the next two months, if your proposals are confirmed. Investors facing the loss of Business Asset Taper Relief and looking to crystallise gains before a possible 80% CGT increase, may find few buyers due to lack of liquidity and current volatile market conditions. As explained in my letter last year, we reviewed our 63 AIM companies (representing about 4% of the market by number). Of these companies, approximately 50% of the shares are held by individuals, including founders, directors and employees or their intermediaries, who could be affected by the loss of taper relief. Clearly if our own experience is indicative of the rest of the market, then, for example, if half of those were under pressure to crystallise gains this tax year, then a quarter of the market could come under selling pressure over the next few weeks in an already very weak market. Though it is more difficult to verify, from our experience we also believe that business asset qualifying investors with holdings in smaller companies quoted on the main market, may amount to as much as 20% of the issued shares. At this end of the main market the liquidity dynamics are similar to AIM and sales activity on the scale envisaged under the new so called ‘Bed & Breakfast Rules’, when investors may not reinvest in the same security for 30 days, could precipitate a deeper market crash than we are already experiencing.
Enterprise Economy
Business Asset Taper Relief has been a great success for the enterprise economy and we would like to see it retained, even if in a modified form. However, we would urge you as a minimum, to consider a longer transitional period before any removal of Taper Relief and most essentially an immediate exemption from the 30 day Bed & Breakfast Rules, allowing qualifying shareholders to crystallise any gains and immediately buy back their shares providing their own liquidity for the transactions. We look forward to the conclusions of your review as promised before Christmas, at the earliest possible opportunity in 2008.
Jamie Matheson
Executive Chairman
c.c. Clive Briault – Director (Retail) FSA
Martin Graham – Director of Equity Markets – London Stock Exchange Group