Some 15 years ago, when Ken Clarke was the Tory chancellor, he wisely foresaw that the best way to encourage investors to take small-cap investing seriously was to provide a range of personal tax incentives to those investing in AIM and PLUS companies. Sadly – and stupidly – successive socialists watered these down to the almost useless level we are left with today.
Courage, mon brave, we have new Tories in government, led by a PM who is committed to low taxation! Well Dave, here is the way to defuse the 40 per cent CGT tax row: provide a real shot in the arm for struggling small caps – at low cost to the Exchequer. By extending the existing ten per cent CGT rate – popularly known as the “Entrepreneurs’ rate” (90 per cent business property relief, if you want to get technical) – to cover investment in AIM and PLUS companies with market capitalisations of less than £25m at the point of investment, the door marked “investor participation” would open to nearly 1,000 traded companies. At present, as anyone knows who even cursorily glances at this universe of hugely important companies, investor interest is barely twitching (“more activity in a tramp’s vest”, as old market hands used to say).
By providing one of the very few areas that are almost CGT free, investors will turn their attention to an absurdly ignored but vital area of our economy, just as they did in Ken Clarke’s era.
So, what’s the catch” Unsurprisingly, it is Treasury civil servants. For some reason, they cannot get their heads around the concept that a beneficial tax rate can/should be linked to market capitalisation. Instead, for years now, they have argued it should be linked to a company’s gross assets! This, presumably, was thought up by some ivory tower academic who is now passing his last days at a home for the mentally maladjusted at one of our more run-down seaside towns.
So, dear reader, seize the day write. Even better, speak to the Treasury minister charged with looking at these matters ahead of the 50 day budget. His name is David Gauke. You could help him make a name for himself!
For more than 30 years, the City Grump has had experience of senior positions in most aspects of city life. These include stockbroking, stock exchanges, fund management and corporate finance.
UPDATE: A reader has forwarded his correspondence with David Gauke MP to Real Business – his office said they’ll respond to all queries. So if you feel strongly about this issue, do make sure you write to David Gauke MP: [email protected] – and let us know!