Alistair Darling was accused yesterday of doing nothing to help the “business powerhouses” of Britain after bringing forward capital gains tax concessions worth £200 million.

Organisations representing small companies welcomed the Chancellor’s changes to his original plans for a flat rate of CGT at 18 per cent by introducing a relief for entrepreneurs. But they said the episode had damaged business relations with the Government.

Mr Darling responded to pressure by announcing that the first £1 million of any gains would be taxed at 10 per cent, rather than 18 per cent.

The 18 per cent rate will apply to any gains over £1 million, but the Chancellor said 90 per cent of the expected 80,000 disposals eligible for relief next year would have their entire gain taxed at 10 per cent.

Gains made on different occasions would also qualify for the 10 per cent rate up to a “cumulative lifetime total of £1 million of gains”, he said.

The plan was more generous than that put forward by the Federation of Small Businesses, and the FSB’s chairman, John Wright, welcomed the action. Mr Wright said that there had been huge uncertainty about what small businesses’ tax liabilities would be from April 2008 and this had made planning for the future very difficult. However, he added that the way that the issue had been handled had “seriously eroded small businesses’ trust in the Government”.

Other organisations voiced concerns about the revised CGT and the manner in which it had been changed.

Martin Temple, the chairman of EEF, the industry body for engineering and manufacturing employers, said: “Today’s announcement sends mixed messages about how favourable the UK tax regime is for investment.”

The strongest criticism came from the CBI.

Richard Lambert, the Director-General, said it was “superficially quite clever” but that even the smallest business owner would lose taper relief and indexation and be worse off than before October.

Mr Lambert said: “These revised measures will do nothing to help the real business powerhouses of this country. Although £1 million might sound a lot, it could have been built up over 20 or 30 years.

The “real wealth and job creators” of the UK economy would be “seriously clobbered”, he said, adding that the measures discriminate against the long-term holding of assets and that they would do “nothing to restore stability in the life insurance market, which faces a period of turmoil”.

David Frost, Director-General of the British Chambers of Commerce, welcomed the change, and said that maintaining the 10 per cent rate on gains up to £1 million would be a “great relief for many small business owners”.

But he added: “The ultimate impact of these changes is going to be a £700 million tax take from business. It is also clear that this has done nothing to simplify the taxation system, the original stated aims of the changes.”

George Osborne, the Shadow Chancellor, told Mr Darling: “In the short, inglorious time you’ve been in office, you’ve only had one original idea on tax and that was a big increase in capital gains, thinly disguised as a simplification.”

Miles Templeman, Director-General of the Institute of Directors (IoD), said the new relief would benefit many small businesses.

But like Mr Frost, Mr Templeman expressed concerns about the tax hit taken by business overall.

He added: “The lifetime limit will be a constraint on serial entrepreneurs”.

“The distinction between business and nonbusiness assets will retain an element of complexity”.

He said that with only ten weeks of the tax year left, businesses would not have enough time to plan their affairs.

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