So the largesse of those Private Equity bods means that us entrepreneurs will have to pay nearly DOUBLE the CGT when we sell our businesses. Darling, this afternoon, announced that from next April there would be just one rate of CGT - 18%. This compares with the current business asset CGT rate of 10% after 2 years. He's also scrapping all taper relief.
So you will pay the same rate on a short term speculative punt on Logica's shares as you would do if you sold your business after 20 years of hard graft and not inconsiderable risk. I campaigned long and hard to get the current regime introduced. First in 1996 with Kenneth Clark of the Tories and then, successfully, with Gordon Brown in 1997.
I believe that the reason why the UK is such a good place to form a new business is because of these CGT rates. I also think that most people do not fully understand what is involved in forming a small business. Nobody understands that your house is pledged against the business. I started my company back in 1986 utilising my credit card allowance to the full. I was personally liable for everything in the business until I sold to Ovum in 2000. Even then, I lent Ovum money to cover the payroll and bankrolled them in their difficult times. I think the 10% rate I paid on the gains I made were fair and reasonable. By the way, the same rate paid by the many Ovum staff in that period.
But if I formed a new business now, both myself and my staff would pay nearly twice the tax.
The only advice I can now give is that if you own a business or shares in a such a private business (including AIM) sell now whilst the rate is only 10%. Stuff your money in the Northern Rock (now that the Govt is underwriting all new deposits from today) and don't bother with any risky new ventures which might create new jobs and opportunity for this country.
A totally retrograde step Mr Darling. One which I and many other budding businessmen will not forget.
Tuesday, 9 October 2007
Darling almost doubles tax for budding entrepreneurs
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5 comments:
Ditto.
I've been at it 18 years so far. Created jobs for 200 employees. Done the usual financial risk, all nighters, etc. Ignored the blandishments of tax 'advisors' (who wants to go the Isle of Man once quarter for board meetings?). Previously always happy to pay whatever tax was due.
Now the burden of tedious and unrealistic employment legislation plus today's tax, mean zero incentive to grow a business and create jobs.
All done to try and rein in a bunch of financial engineers (sorry, the PE industry), who will - for certain - simply pay smarter tax experts to find them ways to wriggle out of their new liabilities.
This is a copy of the response I have recieved from Jeremy Hunt MP - my local Conservative MP for SW Surrey
Hi Richard,
Thanks for your email following the Pre-Budget Report earlier this week. Labour's raid on Conservative Party policies may have dominated the news agenda since yesterday's Pre-Budget Report, but George Osborne and I both think that it is the capital gains tax rise that will have the biggest long-term impact on business and enterprise across Britain.
By abolishing taper relief on capital gains tax, and introducing a new tax rate of 18%, Alistair Darling has raised taxes by £2 billion. He justified this as a move to create a fairer framework for private equity, but as you rightly say failed to mention that the tax rise would actually fall hardest on hundreds of thousands of small businesses, entrepreneurs and investors in new start-up companies – many of whom are already facing higher tax bills after the small business corporation tax increase announced at the last Budget. Probably the single most important thing a government can do in terms of supply-side economic policy is to encourage the start up of new businesses. If private equity use of the taper was a concern - and there are arguments that some private equity capital gains are really income - the problem could have been solved by lengthening the period of the taper.
When the government is turning its back on the small business community, it is even more important that the Conservatives Party fights for change. We are holding Labour to account for the ever-increasing regulatory and legal burden it has imposed on Britain’s small businesses, and we have set out bold policies to reduce this burden, for instance withdrawing from the Social Chapter and reforming the procurement system to make it easier for small businesses to access government contracts. We will also of course continue to fight for lower taxes for business. As George Osbourne has said, we will reverse the small business tax increase introduced at the last Budget, which we will pay for by abolishing the complex new reliefs that were introduced at the same time. We will also look at how we can reduce the headline rate of corporation tax by simplifying the tax system and sweeping away complex reliefs and allowances.
So we are on the case...to deal with this and many other problems facing our small business community.
Best wishes,
Jeremy
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Jeremy Hunt
Member of Parliament
South West Surrey
Tel: 01428 609 416
Fax: 01428 607 498
House of Commons, London, SW1A 0AA
This is a copy of the response from David Cameron's office.
Dear Richard,
Many thanks for your email to David Cameron - I'm replying on his behalf.
I will certainly make David aware of your comments and I know how much he will appreciate you taking the time and trouble to get in touch.
The Shadow Treasury Team are meeting next week with representative business organisations to formulate our response to the Government's CGT proposals. Our focus will be on ensuring continued support for enterprise and aspiration.
Yours sincerely
Alice Sheffield
Office of David Cameron MP
House of Commons
London SW1A 0AA
This is a copy of Stephen Timms response.
I should point out that stephen timms was an Ovum analyst and, like almost everyone at Ovum, had shares. I suggested in my letter to Stephen that he had himself benefited from the 10% rate when Ovum was acquired by datamaonitor in Dec 06. However, I am happy to accept that this ewas not the case (although it obviously would have been...)
Dear Richard
Thanks for the message. As you can imagine I have received a number of messages along these lines. Points noted and understood.
Just for the record - although it doesn't affect this issue one way or another - I have not benefited personally from the 10% rate of CGT. The reason is that, when I became a Minister, the Permanent Secretary at the then Department for Social Security advised that it would be inappropriate to continue to own the shares. I therefore disposed of them into two trusts, one, for 80% of the shares, a charitable trust; the other, for the remainder, a trust for the benefit of our nieces, nephews and godchildren.
Neither my wife nor I is a trustee of either trust.
Stephen Timms
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