Investment in start-ups and growing businesses has become more attractive due to changes to Capital Gains Tax and Entrepreneurs’ Relief at the Budget in March, according to a new survey of business leaders.
Eight in 10 of the 1,200 Institute of Directors (IoD) members surveyed in April thought the Chancellor’s decision to cut CGT rates by 8%, while extending Entrepreneurs’ Relief to long-term shareholders in unlisted companies, would draw investment to entrepreneurial companies.
Stephen Herring, head of taxation at the IoD, said: “The Chancellor rightly reformed taxes on capital gains at the Budget to encourage investment in the entrepreneurial firms that will create the innovative products of the future, and new jobs with them. Today we have the first signs the reforms will pay off, with business leaders overwhelming saying that changes to CGT and Entrepreneurs Relief will draw investment towards start-ups and fast-growing companies.”
The cut to the rate of Corporation Tax, a key parameter for foreign investors, announced at the Budget was also viewed positively by companies. Half of IoD members said that the Corporation Tax cut was the right priority, but three in ten would have liked to have seen other reforms. The IoD said that the UK was approaching the point where other taxes should become the focus for future reductions.
Mr Herring added: “Cutting corporation tax has the great benefit of helping all companies, and the Chancellor deserves to be commended for giving the UK a very internationally competitive rate. Now the good work has been done, at future Budgets the Government should consider whether reliefs targeted at entrepreneurial companies could bring more bang for the taxpayers’ buck.”
While businesses welcomed these measures to boost investment, they were more uncertain on changes to personal tax. One of the Chancellor’s major tax promises for this Parliament is to raise the 40p income tax threshold to £50,000, but opinion in the business community was divided on whether the increase to £43,000 next year showed the Government moving fast enough. Forty-eight per cent thought the Chancellor’s pace was about right, but nearly the same proportion, 44%, thought it was too slow.