The Chancellor Gordon Brown is expected to change the tax rules for venture capitalists buying brokers in this year's Budget.
According to Mazars partner and tax expert Andrew Green,the Treasury may change the rules on business asset taper relief. At present, if a venture capitalist or individual invests in a brokerage and relinquishes its interest within two years, it will pay tax on chargeable gains on assets of 10%.
"The Treasury does not like individuals taking short-term interests in these companies and then selling out. As such the rate of tax could rise to between 12%-15%.
"Will this stop the acquisition drive in regional brokers? I doubt it," he added.
Green said the Treasury could also withdraw disclaimers involving tax losses on insurance companies' acquisitions.