The British Venture Capital Association (BVCA) has cautioned the new UK coalition government against the assumption that any increase in capital gains tax (CGT) would produce enhanced revenues that could be used to reduce taxation elsewhere.
The BVCA, in a statement, applauded much in the Coalition Agreement of the newly formed UK government, but made reference to the stated ambition of cutting personal allowances on income tax for those on low and middle-incomes by raising revenues from "taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities."
Britain already has a relatively high rate of CGT (in Australia, New Zealand, Holland, Hong Kong, Switzerland among other countries the rate is zero) and the last time that a government raised the rate of CGT from 10% to 18% (Labour in 2007), the revenues accumulated fell sharply from GBP5.3bn in 2007/2008 to GBP2.5bn in 2009/2010, according to the statement.
The BVCA would, therefore, "be actively engaging with ministers to urge them not to make hasty decisions in this complicated area". The emergency budget, to be held on June 22, is designed to deal with the spending cuts required this year to reduce the budget deficit and it would be unwise for it to involve a Capital Gains Tax increase, said the BVCA.
In the statement, the BVCA added that it would be emphasizing to the government that the positive role played by private equity and venture capital in the recovery plainly meant that capital gains in that sector should be considered to be "business" and the "generous exemptions for entrepreneurial business activities" should obviously be applicable to both the private equity and venture capital sectors as well.
The BVCA said it looked forward to working with the new administration to enhance the current recovery and being part of a debate about the restructuring of the UK economy in the years ahead.
A comprehensive report in our Intelligence Report series examining tax-sheltering arrangements for investors, including Venture Capital, Forest Finance and Film Finance in a number of key jurisdictions, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report5.aspTags: tax | business | private equity | venture capital | budget | capital gains tax (CGT) | United Kingdom
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