UK Accountants Criticize Chancellor's 'Sop' To Start-Ups

by Jason Gorringe, Tax-News.com, London

02 November 2007

The Chancellor's announcement of GBP100,000 tax relief on Capital Gains Tax (CGT) for business is a sop to those business interests who damned his abolition of taper relief, which will do little to offset the damage to business start-ups created by the 18% rate set in the Pre Budget Report, claims Peter Penneycard, Tax Partner at accountants and business advisers PKF.

"The latest announcement simply illustrates short-term 'on the hoof' setting of tax policy rather than considered policy designed to achieve clear economic objectives", Peter says. "GBP100,000 may sound like a lot but in terms of retiring from a business, it's nothing.

"By taking steps to address the relatively minor issue of the taxation of private equity profits – essentially a political move - the Chancellor has angered the business community and hit one of Britain's key economic strengths – small business entrepreneurship.

"The tax simplification achieved through abolishing taper relief was welcome but, if he truly wanted to foster the entrepreneurial spirit in the UK, the Chancellor should have extended the rules around the Enterprise Investment Scheme, to allow owner-managers to invest in their businesses free of CGT. That relief on investment of only up to GBP7 million is currently only open to investors with no involvement in the running of the business.

"The most worrying thing is that the Government appears to be using tax policy to address political criticism. That's a recipe for economic chaos which will frighten entrepreneurs away from the UK. Real economic issues need to be addressed by long-term planning and policies where all the implications are carefully looked at rather than knee-jerk reactions to the latest opposition or media criticism.

"Having had a decade of prudence, the business community is rightly becoming nervous about the stream of announcements coming out of the Treasury. The question is whether the economy is being managed for the benefit of the country or the Government."

PKF is a firm of accountants and business advisers with more than 1,800 partners and staff operating in 23 offices in the UK mainland firm, a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm's web site is www.pkf.co.uk.

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