Press Release

Chancellor’s tax changes will hit entrepreneurs in retirement

21 October 2007

The Federation of Small Businesses (FSB) has warned that the proposed change to capital gains tax (CGT) taper relief, announced in the recent pre-Budget Report (PBR), will hit entrepreneurs in their retirement as well as in the normal course of business sales.

Many business owners, who started from scratch and worked long hours at considerable personal financial risk, were depending on the sale of their business to fund their retirement.  With the increase in CGT from 10% to 18% these business owners will see a lower return on their investment.  This comes on top of the removal of tax relief on share dividends in 1997 that did a great deal of harm to pension provision in the UK.

The change will not merely hit business people from April next year when the tax change takes effect.  Those seeking to sell their business before April 2008 will find that potential buyers will seek a discount on the sale knowing that the alternative to selling immediately is a larger tax bill later on.

John Wright, FSB National Chairman, said:

“Many entrepreneurs now face a more uncertain retirement.  Their contribution to the wealth of the nation – their hard work, their taxes, the jobs they offer people and the facilities they provided for their local communities are all being taken for granted.

“We are not talking about millionaires or fat cats, but entrepreneurs who have taken a big risk and deserve their modest rewards on the sale of their business.  A secure retirement for entrepreneurs is now looking less likely thanks to the Government’s tinkering with capital gains tax taper relief.

“Following the removal of tax relief on share dividend in 1997 this move is yet another attack on people being able to make secure provision for their old age.  The Chancellor should suspend this proposal until full consultation with business groups has been held to radically alter and improve upon this disastrous proposal.”