Member Article

Recent press speculation suggests that Entrepreneurs Relief may be a victim of its own success and could be restricted or even removed. For the individual entrepreneur and for SME Britain more generally such a change would be little short of disastrous.

Entrepreneurs Relief has been a key source of oxygen for our anaemic economy over recent years. For business owners they could endure a lack of support from their bank and the inordinate red tape of the UK economy because at least when they came to sell they would pay tax at 10%. Yes direct and indirect taxes might increase but at least the Capital Gains Tax regime was straightforward. Historically the more exotic tax planning schemes might have seen vendors heading off-shore but Entrepreneurs Relief meant a simple 10% and vendors were free to enjoy the fruits of their labour. What this of course meant in reality was that once the 10% had been paid vendors would begin funding new enterprises; working with new management teams – fundamentally creating wealth.

Whether an end to Entrepreneurs Relief is a real threat only time will tell. The advice to potential sellers has to be that if it begins to look like a reality then consider sale – letting the tax tail wag the corporate dog is rarely right but in this case it might be appropriate. The tinkering with taper relief of several years ago did create a spike in sales activity.

Let’s hope the future of Entrepreneurs Relief is clarified soon. Simplicity in most things is to be applauded – tinkering will only serve at best to distract SME Britain but at worst it could end up stifling UK entrepreneurs for a generation and beyond.