Alistair Darling will come under attack today by a cross-party panel of MPs for failing to consult business before announcing his controversial reforms of capital gains tax last month.

The Labour-dominated Commons Treasury Committee says that it is concerned by the lack of consultation surrounding the scrapping of taper relief on capital gains, a move that provoked surprise and fury from all the leading business groups when it was announced in the Chancellor’s first PreBudget Report (PBR).

It gives warning that the move could have a detrimental effect on small businesses and says that it will hit people who are about to sell their firms and retire especially hard.

In a review published today, which contains barely a single positive response to any aspect of the PBR, the committee also questions the Treasury’s rosy growth forecasts, criticises its fiscal strategy and complains that MPs were given less than a week’s notice of when the PBR was being delivered.

The committee complains that the Treasury “appears not to have consulted explicitly” on withdrawing taper relief, and calls on Mr Darling to make clear which areas of the policy he is willing to change before the new rules take effect in April.

The reforms initially were billed by Mr Darling as an attempt to ensure that private equity paid a fairer share of tax. But the report found evidence that private equity could easily absorb the new rules, while many other businesses could suffer.

“We are concerned about the possible detrimental effect that the withdrawal of taper relief could have on small businesses, employee shareholders and longer-term investment,” the MPs say. In particular, they say that the withdrawal of taper relief “without adequate notice” will penalise those planning to sell their businesses and retire within the next two years. Because of the bluntness of the simplification measure, some firms could suffer unfair costs over contracts entered into before the PBR that take effect after April, they add.

Other proposals are given short shrift. The MPs say that they cannot calculate how much the Exchequer stands to gain from Mr Darling’s proposal to allow married couples to share their inheritance tax allowance, casting doubt on his fiscal forecasts.

In the wider economy, the MPs say that there is a risk that the financial sector would take a deeper hit from the credit squeeze than the PBR predicts, casting doubt on the Government’s hopes of a rebound after next year and potentially making the outlook for the public finances much worse.

The report says: “We feel that the Treasury’s optimism that the growth rate should revert to trend in 2009 has not been adequately explained.”

John McFall, the committee’s chairman, said: “Tax simplification is a desirable objective, but the reforms of capital gains tax will have an immediate impact on many individuals and businesses that have sought to plan ahead. There is a window of opportunity for meaningful consultation between now and the 2008 Budget, and the Treasury needs to establish clearly the terms for such consultation.”

He said he was encouraged by Mr Darling’s willingness to discuss his proposals with business groups. The move to scrap taper relief has sparked an alliance between the CBI, the British Chambers of Commerce, the Federation of Small Businesses and the EEF, the manufacturers’ group, all of whom have published alternative proposals in recent weeks.

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