Entrepreneurs will usually place making lots of cash high on their list of reasons for venturing out. Others include flexibility and freedoms.
So in “Enterprise Britain”, the removal in 6 months time of taper relief on capital gains has received condemnation from expected (CBI) and unexpected (GMB Union) quarters.
The main target of the change were said to be the “fat cats” of private equity who have been able to take advantage of a regime which meant they, along with everyone else, paid 10% of their gains provided qualifying assets were held long enough. But entrepreneurs are similarly hit.
Ok, you might argue that 8% extra still means you get a lower tax rate than from earned income (40% on higher salaries). But then, the introduction of a flat rate of 18% capital gains tax now means that you are rewarded equally for gains made from listed company shares which gives no recognition to people building businesses rather than simply investing in shares.
As with any tax change, the law of unintended consequences arises. In penalising “fat cats” whose tax advisers will find other loopholes (levy higher interest rates on the loans they make to companies they also own to extract more money to offshore companies), they also hit the very people they claim to be seeking to encourage.
The change will be introduced in 6 months time. So if you are thinking of selling, you may want to do it before then!