Incentivise investors, not just entrepreneurs, says Richard

The ex-Dragon argues that yesterday's enterprise-friendly measures didn't go far enough...

by
Last Updated: 07 Jan 2011

Before the Budget, entrepreneurs were worried about the rumoured hike to capital gains tax. But although the top rate (for higher rate taxpayers) went up to 28%, that was less than the 40% or 50% being talked about. And for entrepreneurs, the news was even better: not only did they get to keep their 10% rate, but the threshold at which this is charged was lifted from £2m to £5m. So those looking to sell their company any time soon are going to be a lot better off than they may have thought yesterday. Good news for business owners, then - but should the Government be doing even more to promote enterprise?
 
Will Wynne, who owns London-based ArenaFlowers.com, says it’s a relief to see the government is trying to encourage entrepreneurs. ‘When taper relief was taken away by the Labour government, I was annoyed – as were a lot of entrepreneurs,’ he says. ‘Even with the £2m relief, it was a massive disincentive.’ But Wynne says raising the threshold for entrepreneurs’ relief will create a real incentive for business owners to focus on growth. ‘It’s a great idea.’
 
Ex-Dragon Doug Richard, though, is less impressed. According to him, the coalition hasn’t gone far enough to shake up the system. ‘It’s fallen into a trap set by the previous government,’ he says. Only allowing entrepreneurs to make £5m over before they are forced to pay the higher rate will actually limit entrepreneurial activity, he says. ‘The people protected by this are the modestly successful: the people who started a business and made a bit of a profit. But that is the wrong thing to encourage.’
 
Richard’s message is: provide incentives for investors, rather than just entrepreneurs, and economic growth will follow. ‘At the moment, there are two conditions to getting the relief: you have to be the owner, and officer or an employee of the company, and you have to own 5% or more of shares.’ To encourage investment, these restrictions need to be lifted, he says. ‘There should be no cap on success.’ A slightly self-interested argument, admittedly - but we see his point.
 
Still, there will be those who may now jump at the chance to make their exit – and equally, there will be those who, having sold their business in the past few months, may be kicking themselves. As Richard puts it: ‘there’s some poor schmuck out there who’s not a happy puppy right now’.

In today's bulletin:

Budget 2010: Can the private sector pick up the slack?
Kesa Electricals back in the black on white goods
White House gets knuckles rapped over six-month drilling freeze
Incentivise investors, not just entrepreneurs, says Richard
Employers face sickie spike for England match

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today