The SME sector accounts for 60 per cent of British GDP
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Last week’s rise in CGT is set to cause major problems for small and medium enterprises (SMEs), say entrepreneurs.
Whilst the lifetime allowance for Entrepreneurs Relief has been increased from £2m to £5m, meaning that the first £5m of capital gains will be taxed at a lower rate of ten percent, high earners will face an elevated 28 per cent fee on any other gains.
The tax increase is bad news for start-ups who depend on cash injections from wealthy investors to get their businesses off the ground. With investors reaping less benefit from their earnings, entrepreneurs may have no choice but to take on huge personal risks and fund their endeavours themselves.
Further disappointment has arisen following the decision not to reintroduce taper relief, which would offer tax cuts for long-term asset holders.
‘A rise in CGT will act as a disincentive to launch, invest in, or even continue to run many good businesses at a time when they most need support,’ explains Tim Ashley Sparks, managing director of Bartercard UK.
The SME sector currently accounts for a hefty 60 per cent of British domestic GDP, but its fate hangs in the balance as further cuts may be looming on the horizon.
‘These entrepreneurs are more likely than any other sector of society to convert capital from the sale of a business in to more wealth generation opportunities,’ Tim Ashley Sparks explains.
‘Yet we are in danger of taxing them and the country out of prosperity.’
Jessica Whiteley
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