Alternatives to Capital Gains Tax (CGT) have been set out by the CBI for consideration by the Chancellor and Prime Minister.

This follows the Comprehensive Spending Review, which could see councils introducing a supplementary business rate, leaving businesses facing a tight financial squeeze.

Councils have also been handed other new powers including proposed planning charges, congestion charging, work place parking levies and the power councils have had since 2004 to borrow for capital expenditure, all of which have caused concern.

In letters to Alistair Darling and Gordon Brown, the CBI said the abolition of Capital Gains Tax taper relief, the removal of indexation and the creation of a flat rate of 18% had undermined the Government's ‘pro-enterprise, pro-business, pro-long-term investment policies'.

Alternatives outlined by the CBI's director general Richard Lambert include separating the tax treatment of business assets and non business assets, and continuing the pre-PBR rules for CGT on business assets.

Other recommendations include cutting CGT on business assets to 10% after four years, a £100,000 tax free allowance on assets held longer than 10 years and delaying the introduction of the changes for business assets for five years.