Budget fears focus on CGT and NI burden

Kathleen Brooks
ENTREPRENEURS will be holding their breath as the new Chancellor delivers his first budget next week. Changes to capital gains tax (CGT), Vat and National Insurance are top concerns.

On a positive note, some commentators believe that entrepreneurs have nothing to worry about. Alex Henderson, tax partner at PricewaterhouseCoopers, says that he is anticipating: “An extension to the existing definition of business asset, possibly to include shareholdings by employees in their employers”. He also predicts that the CGT rate on such assets will be set somewhere between 10-20 per cent and that an increase in entrepreneurs’ tax relief, currently £2m, could be on the cards next Tuesday.

There is much uncertainty as to whether the government will be able to provide all of this given the Treasury’s pressured purse strings. John Walker, the national chairman of the Federation for Small Business, is particularly concerned about National Insurance, saying: “Proposals to give new firms a National Insurance holiday do not go far enough and will not help those businesses who have been running for a couple of years and want to expand by taking on staff.”

CityAM has found that entrepreneurs will wait with baited breath to hear of the proposed changes to CGT. “Any change needs to take into account the motivation needed to encourage entrepreneurs to continue to take risks,” says Patrick Reeve, managing partner of Albion Ventures, a venture capital fund. Reeve also wants the government to consider the position that entrepreneurs play in contributing to the public purse: “We estimate the companies in the Albion venture capital trusts have contributed in excess of £80m to the public purse in income tax and national insurance alone.”

Likewise, Hugo Burge, chairman of Cheapflights Media, agrees that from an entrepreneurial point of view “all eyes will be on CGT”. His other concern is the government’s plan to replace air passenger duty with per aircraft duty: “It seems likely to lead to higher fares, which is not good for business, consumers or growth.”

While the government must tackle the UK’s ungainly deficit, it must be careful not to crush entrepreneurs with an unsustainably high tax burden.