CHANCELLOR Alistair Darling's reforms of controversial capital gains tax changes will do little to appease entrepreneurs or restore trust in the government, business leaders and advisers warned today.

His measures will benefit small business owners but could hamper serial entrepreneurs, with a knock-on effect on job creation and investment, said experts.

Mr Darling announced he was watering down earlier proposals to reform CGT, almost halving the rate for people selling business assets of up to £1m.

Capital gains of more than £1m will still be taxed at a new standard rate of 18 per cent, down from 40 per cent, but `taper relief', which allows a sliding scale of charges down to 10 per cent, will be scrapped.

Mr Darling said the move would benefit the owners of small firms when they sold their businesses. About 80,000 businessmen were likely to qualify for the relief, at a cost to the Treasury of £200m a year.

Mr Darling said the government wanted to do as much as possible to encourage entrepreneurs and would keep the relief under review.

The Federation of Small Businesses, which led the campaign for the `entrepreneurs' relief' rate, welcomed the changes but warned that small businesses' trust in the government had been damaged by the original proposals and the uncertainty over revisions to them.

Paul Henly, regional policy manager for the north west, said the changes would go some way to protecting entrepreneurship in the UK, as well as benefiting small business owners planning to pay for their retirement with the sale of their businesses.

Clobbered

Richard Lambert, director general of the CBI, said: "The reality is that these revised measures will do nothing to help the real business powerhouses of this country. Although £1m might sound a lot, it could have been built up over 20 or 30 years. It is clear that the real wealth and job creators of the UK's economy, selling assets for a lot more, will be seriously clobbered."

Ilona Krohn, of Greater Manchester Chamber of Commerce, said: "We welcome both the simplification of the tax system and the fact that these new proposals will go a long way to addressing the small business community's concerns."

Ann Jordan, chairman of the Institute of Directors in the north west, said: "The government has listened to some of our concerns, and the new relief will benefit many smaller north west businesses. But there will still be a very large tax hit on business overall."

Mike Walker, of accountancy giant KPMG's Manchester office, said: "For the small business owner, it appears to be good news, but entrepreneurs, who are the real wealth creators, will be disappointed."

Meera Parmar, a partner at Bolton and Manchester accountants Cowgill Holloway, said the changes were a `small olive branch' but warned they would do little to undo the damage caused during the last few months.

Stephen Baker, a corporate finance partner at accountants Grant Thornton, warned: "The update is good news for small businesses, but it won't have any material impact on those who are trying to build real wealth in the region."

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