A House of Lords committee has said that recent tax reforms introduced by the government may have harmed the UK’s business competitiveness.

Reporting on the Finance Bill, the Lords Committee on Economic Affairs described the Bill’s changes to the tax system as “poorly handled” and accused the government of failing to consult adequately on its measures.

The criticism was aimed at the Chancellor’s decision to implement a flat rate capital gains tax charge on assets of 18 per cent and to levy a £30,000 charge on non-domiciled foreigners living and working in the UK.

As a result, the committee said, the UK business tax system appeared “unstable and subject to severe shocks”.

Lord Vallance, the chairman of the committee, said: “Our general impression from the evidence we received was that the formulation of tax policy has been marked by uncertainty of direction. We feel that the Treasury and Revenue and Customs must now look carefully at how they have handled these policy changes and do all they can to make sure that this year’s mistakes are not repeated.”

Particular worries were expressed over the possible effects that the non-dom reforms may have on the UK’s reputation as attractive for business, running the risk of deterring overseas entrepreneurs from investing in this country.

The report said: “It is vital that all that is possible is done to retrieve the position. The committee calls on the Government to reassure non-domiciled people that the move was not intended to discourage them from coming to the UK and to reassure investors of the advantages of investing in the UK.”

A Treasury spokesman responded by saying: “The Government consulted fully on both the residence and domicile and CGT tax reforms. We are confident these reforms contribute to a fairer, more transparent tax system.”