0 likes32 views

Entrepreneurs petition chancellor to maintain business tax relief

October 24, 2024

More than 1,500 UK entrepreneurs and business leaders have signed a letter to Chancellor Rachel Reeves, urging her to reconsider proposed changes to business asset disposal relief (previously known as entrepreneurs’ relief), ahead of the budget on October 30.

The letter warns that modifying or scrapping the relief could severely undermine the entrepreneurial spirit that has driven UK economic growth and innovation.

Currently, business asset disposal relief allows entrepreneurs to pay a reduced tax rate of 10% on qualifying gains, up to a lifetime cap of £1 million. However, this relief is believed to be at risk as the government seeks ways to cut costs and repair public finances. The signatories of the petition argue that removing or limiting the relief would send the wrong message to entrepreneurs and investors, making the UK a less attractive place to build a business.

Prominent signatories

The petition, organised by venture capital firm Fearless Adventures, co-founded by Dominic McGregor, includes signatures from leading entrepreneurs such as Peter Roberts, founder of Puregym; Will Butler-Adams (pictured), managing director of Brompton; and Jennifer Roebuck, co-founder of Tortilla. They argue that the relief provides a crucial incentive for entrepreneurs to take risks when starting businesses and is vital for fostering economic growth.

The letter acknowledges the importance of tax revenue to fund public services but contends that taxing entrepreneurial gains at the same rate as regular income would deter business creation. In addition to calling for the relief to be retained, the signatories are asking Reeves to restore the lifetime limit to £10 million, which was reduced to £1 million in 2020 by then-chancellor Rishi Sunak.

Conflicting views on the relief

While the signatories emphasise the importance of the relief for encouraging risk-taking and business innovation, critics argue that it is poorly targeted. Both the Resolution Foundation, a left-leaning think tank, and the Institute for Fiscal Studies have called for the relief to be scrapped, citing concerns about its cost and effectiveness. The relief has been labelled “Britain’s worst tax relief” by some experts, arguing that it disproportionately benefits wealthier individuals without sufficiently stimulating economic growth.

However, entrepreneurs maintain that removing or limiting the relief would harm not just high-profile founders but everyday business owners such as restaurant operators, mechanics, and designers, who rely on it as an incentive to take the financial leap required to launch a business.

Concerns from the Federation of Small Businesses

The Federation of Small Businesses (FSB) echoed these concerns, warning that increasing taxes on entrepreneurs when they sell their businesses would stifle business creation and innovation. Tina McKenzie, the FSB’s policy chairwoman, pointed out that many entrepreneurs invest their life savings into their ventures, making them vulnerable if they cannot secure a fair sale. McKenzie stressed that removing the relief could discourage people from starting new businesses and taking the risks necessary for economic growth.