Lord Sugar, the former enterprise tsar, has spoken out against the government’s plan to increase capital gains tax, warning that it could have “devastating” effects on levels of enterprise in the country.
Lord Sugar slammed the coalition’s plans to bring CGT in line with income tax yesterday, saying the move would disincentivise potential entrepreneurs and startups.
Speaking in the House of Lords, where Lord Sugar initiated a debate on the effect of the government’s policies on entrepreneurship, he said:
“It will have a devastating effect on enterprising people’s desire to take the lead and set up their own businesses with a view of either floating them or selling them by way of a trade sale,” Lord Sugar warned fellow peers.
“There is a £2m entrepreneurial relief currently in place but in this day and age this amount falls short of the aspirations of growth companies.”
Under current rules, entrepreneurs’ relief gives business owners a one-off 10 per cent tax rate for the first £2m of capital gains. They are then taxed at 18 per cent on any further gains.
“Raising capital gains tax rates will depress their desire to work hard and the most devastated with be those business or asset owners who have worked hard and are reaching an age where they are wishing to consider a sale,” Lord Sugar continued. “Payout [on exit] is the ultimate goal for such entrepreneurs and their employees who have been incentivised with approved share option schemes.”
But Baroness Wilcox, the business minister, told peers that the “majority” of entrepreneurs in SMEs would continue to enjoy CGT relief: “To be truly effective, the CGT system must also encourage enterprise and support entrepreneurship. For business owners, entrepreneurs’ relief provides a CGT rate of 10 per cent for entrepreneurs up to a lifetime limit of £2m.
“This relief covers the vast majority of entrepreneurs in SMEs, and the coalition agreement commits the government to maintain generous relief for entrepreneurial business activities.”
Real Business is strongly opposed to any rise in CGT – and we’re keen to hear your views. We’re meeting Mark Prisk MP, the government’s enterprise minister, next week, where we will pass on your questions and worries. Leave your comments/questions below.