Are the CGT proposals as grim as many SME’s claim?

"From the CBI to the Federation of Small Businesses, there’s a mounting chorus of disapproval But it’s not the cut they’re complaining about but the abolition of taper relief that goes hand-in-hand with it.

"This means that owners of small and medium sized business are going to see not a fall in Capital Gains Tax, but a rise from 10% to 18% from next April. Or as the CBI puts it: ‘Owners of small enterprises who have toiled over years to build up their businesses are now faced with selling up before April or facing a substantial dent to their investment’.

"And that’s the key. Why should I, or any entrepreneur, invest in a business that involves substantial risk to set up and takes years to develop if the taxman almost doubles his share of the spoils? This is the real danger of these proposals. It discourages people from investing in long term projects.

"Supposedly, these CGT changes could provide the catalyst to boost productivity by disposing of some underperforming operation at the current and attractive tapered CGT rate of 10% and use the capital raised to invest in a potentially more profitable enterprise. But given that the changes are due in April, there doesn’t seem much opportunity to do this.

"I share the real worry that the new rules might drive the some entrepreneurs from starting up in the UK in the first place. It certainly doesn’t send out the right signal. No-one doubts that determined people will make their businesses succeed. But what good is it to the UK if they decide to make their fortune in another country?

"The new Chancellor had a great opportunity to make good on Labour’s promises to support British businesses. But to put this dampener on small firms – the lifeblood of the UK economy – was not a good move.

"Both Gordon Brown and Alistair Darling know very well how Britain’s economy has managed not only to survive, but thrive, since it’s decline as a major manufacturing powerhouse. It’s the massive growth of start-ups in the service sector – the explosion of talent and entrepreneurial spirit. Why put this at risk?
"In any event, however one views the CGT proposals, there are some government tax changes afoot that just cannot be seen positively in any way.
"Take the Chancellor’s idea to charge non-domiciled residents a flat £30,000 annually. Sure, it sounds fair to the majority of the electorate. But in reality it’ll raise very little for the Exchequer and is likely to do far more damage to the economy by making the UK a less attractive place for foreign entrepreneurs to live and work here.

"I spend most of my time in Spain but I spend as much time as I can in the UK overseeing my UK-based companies that provide millions of pounds in tax to the Chancellor every year. This move won’t make me take my business abroad but it’s easy to see other entrepreneurs doing exactly that. – making the UK lose millions for the sake of a few thousand. And it will most probably encourage entrepreneurs already non resident to establish their new enterprise outside the UK – as he has effectively stopped them spending enough time to establish and operate a business.

"As if this wasn’t enough, the Government will also include the days non-domiciled residents spend leaving and arriving in the UK as part of the 90 day maximum they’re allowed each year. This will further reduce the amount of time foreign based entrepreneurs spend nurturing their UK businesses.

"And that’s not good business whichever way you look at it."

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