By Claire West

.The Federation of Small Businesses (FSB) has warned the Government that any plans for a change in tax law aimed at private equity firms could also damage small firms

The Prime Minister has recently spoken of his desire to change Government policy on certain parts of the tax regime to ensure that private equity is taxed at an appropriate level.

However, small businesses and entrepreneurs also benefit from taper relief on capital gains that could be targeted by these changes. Small businesses - that together employ twelve million people - are concerned that any changes proposed in the forthcoming Pre-Budget Report may stifle their ability to grow instead of addressing concerns about private equity.

The Government has targeted small business growth as a key area for the new Department for Business, Enterprise and Regulatory Reform. However, this will not be achievable if changes in the tax rules from the Treasury hit small firms.
Bill Knox, FSB Taxation Chairman, said:
“The Government will have to tread carefully if it is not to hit small businesses in the crossfire of its proposed attack on the tax regime as it relates to private equity.

“The Prime Minister rightly speaks warmly about the British entrepreneur. However, any changes in the taper relief regime targeted at private equity risk hitting small businesses as well.

“The moves to change tax policy on gains from private equity may also be counter-productive. Few of the people who currently earn large amounts from private equity are domiciled for tax purposes in the UK anyway. But small businesses generate fifty per cent of UK GDP and do pay tax in the UK.”

More information on taper relief can be found here.