TRUST in the Government has been "damaged" following tax decisions made by the Treasury, say north Essex businesses.

Chancellor Alistair Darling announced his decision to remove capital gains tax taper relief, during his pre-budget report last year.

Now, following pressure from business groups, he has announced a ten per cent "entrepreneurs' relief".

This means the first £1 million gained after selling a business in a person's lifetime, will be taxed at ten per cent, with anything above that amount taxed at 18 per cent.

But while businesses welcome the change, which will come into effect on April 1, they said Mr Darling has not gone far enough.

Terry Taber, Essex regional organiser of the Federation of Small Businesses (FSB), said: "The entrepreneurs' relief will 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.

"But the way in which the whole issue has been handled has seriously eroded small businesses' trust in the Government. There has been huge uncertainty about what small businesses' tax liabilities would be from April 2008 and this has made planning for the future very difficult. Even now small business owners have very little time to prepare before these new changes come in," he said.

John Clayton, chief executive of the Essex Chambers of Commerce, said while the change tax relief has "stopped the Government in its tracks", the deal put forward is still "miserable".

"Small businesses see the money earned from the sale of their business as security for retirement. They have worked hard for it and the Chancellor is just helping himself to their money," explained Mr Clayton.

He said the Government needs to review the entire tax system if taxation on small businesses is to be fair.

The Institue of Directors (IoD) said they still have "some concerns".

IoD director general Miles Templeman, said: "The fact that there will be no fully exempt gain means that complicated calculations will still be needed in all cases. Furthermore, the relief will be significantly less generous than the old retirement relief."

He added the IoD was "disappointed" that the implementation of the capital gains tax relief is not to be delayed.

"There are only ten weeks of the tax year left, which does not give businesses much time to plan their affairs. A delay of a few months would have been very helpful," he added.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), added: "The lesson for the future is for government to consult with interested parties before making such drastic changes, rather than having to go through a retrospective process that frustrates and engenders lack of trust."