UK Coalition Urged To Foster Enterprise

by Jason Gorringe, Tax-News.com, London

14 May 2010

The Head of UK private business at PricewaterhouseCoopers LLP, Mary Monfries, has announced a wish-list for the new coalition government to foster and encourage private businesses and entrepreneurs in the UK.

Looking for the newly formed coalition to encourage entrepreneurs and to introduce stability to the business environment, Mary Monfries said: “Stability, certainty and competitiveness are the three key ingredients needed to nurture enterprise, and must be at the heart of pending policy announcements. The recession proved a testing time for privately owned businesses. And while many have shown great resilience, through creative management thinking and getting on with it, the new coalition government has a duty to put plans into practice that will provide a certain and level playing field, encourage growth and instil a greater sense of pride in the UK’s enterprise sector.”

The wish-list which PwC wants the new government to consider in its first 90 days in office is:

• Keeping the capital gains tax (CGT) rate for business assets low. Arguably this is the single most important tax factor in encouraging entrepreneurial risk-taking by founders and individual investors. Business Asset Taper Relief was a highly successful measure introduced by the previous government. As far as entrepreneurship is concerned, the negative impact of its withdrawal far outweighs any limited increase in tax revenues. In the recent budget, the Labour government doubled the upper limits for Entrepreneurs Relief, which was welcome. A figure of GBP2m, though, doesn’t underpin the sort of ambition and capital growth aspiration involved in building world class companies, so it is crucial that the tax rate applied to all gains from investment in privately-owned trading businesses is kept as low as possible. To increase the current 18% rate for business assets would send a very negative message and at the same time raise limited money.
• Recognizing that participation in capital growth is a key part of a private business’s ability to attract and retain key people and to align their personal objectives with those of the business long-term. It will be imperative to ensure that any future legislative or other intervention to attack perceived abuse distinguishes between blatant attempts to re-categorize short-term bonuses to access a lower rate of tax and genuine participation in the potential growth in value of a business and that the benefit of any reduced capital gains rates on business assets are also available to employee shareholders.
• Maintenance of business property relief from inheritance tax. This is crucial to the long-term stewardship and continued multi-generational family investment in so many of the UK's established family businesses.
• Continued support of venture capital trusts and the enterprise investment scheme - which together with a few venture capital funds that genuinely operate in early stage venture in the UK, play a crucial role in bridging some of the risk capital funding gap.
• A real voice within government. In a recent PwC Enterprising UK 2009 survey, private business leaders expressed a need for closer dialogue with government, with most believing that they don’t have enough of an influential voice with government. Many surveyed also expressed a need for "a level playing field", and to be allowed the freedom to "get on with what we know best - growing our businesses." Encouraging entrepreneurship and nurturing the strength of the enterprise sector must be beneficial to all of society in the longer-term.

The Chairman of the Federation of Small Businesses, John Walker, has expressed the concerns of the small business community about the uncertainty facing UK’s small firms in the coming years. A snap poll conducted by the Federation showed that 54% of firms did not intend to move forward with plans to expand and 49% wanted another election within six months.

Mr Walker went on to say that: "These figures worryingly show that small firms have lost confidence in the economy following the outcome of the election just as the business community was beginning to recover from the downturn. At a time of economic uncertainty small businesses really need a government – of whatever make-up – to get on with the job and set out a plan for dealing with the deficit and returning the UK economy to growth."

He continued: "Confidence is vital for small businesses and we know that they want to take on new staff and grow their business, but are still cautious about whether the economy is strong enough to do so. The FSB is calling for a renewed economic stimulus to help small businesses continue to create jobs, get access to crucial finance, innovate and start up new businesses, to get us squarely on the road to recovery."

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