There was a strong reaction to the government’s plans for a £2.7 billion raid on small and medium-sized businesses.
Chancellor Rishi Sunak is proposing to use the budget to scrap relief for entrepreneurs – a tax break introduced with aim to encourage start-ups.
It allows business owners to pay a capital gains tax of 10 per cent, instead of the usual 20 per cent, when they sell their business, up to a maximum of £10 million.
Removing this would constitute a “tax on ambition” and would encourage entrepreneurs to move abroad, which would affect jobs in the UK.
The Federation of Small Businesses (FSB) has said that if the tax relief is removed, it estimates that business owners will face a penalty of £15,000 on average.
A group of 150 prominent business owners wrote to the Chancellor on Friday to tell her that entrepreneurs will move abroad if the help is withdrawn.
Small and medium-sized enterprises (SMEs) provide jobs for 16 million people in Britain.
The government hopes the removal of tax relief will help pay for nurses, police officers and construction projects in the Midlands and North.
Mike Cherry, Chairman of the FSB, said: “Removing the relief for entrepreneurs would make a mockery of the idea that it still makes sense to set up a business.
This decision would be an incredibly damaging way of telling anyone considering investing in their business not to worry about it.
The Conservative Party has made a clear commitment in its platform to reform, not cut, this assistance. They must keep their word”.
The relief cost the Treasury £2.7 billion in 2018/19, compared to £427 million in 2008/9 when it was introduced. Is this the main reason for this drastic decision? It declined to comment.
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