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’.
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