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Alternative Finance blog

Entrepreneurs' Relief Cut: The Important Facts

Entrepreneurs' Relief Cut: The Important Facts

1 months


Author: Stephen Hazell-Smith, Chairman of NextFin (Twitter: @thecitygrump)

You will probably have seen that those think tanks, The Institute for Fiscal Studies and the Resolution Foundation, together with some mainstream media commentators, have labelled Entrepreneurs' Relief (ER) as a meaningless benefit for the rich. What nonsense. Indeed, I am willing to bet a pound to a pinch of salt that none of these people have ever started a business in their lifetimes.

So, let's look at a couple of key facts:

  • In 2019 ER, being levied at 10% of the capital gain was £2.7bn. Thus £27bn of successful companies were created, which at that level is equivalent to at least 5 FTSE 100 companies per annum, the current cut off point for FTSE 100 eligibility being circa £5bn.

 

  • Employee shareholders, which of course includes the working founders of the business are not eligible for the Enterprise Investment Scheme (EIS). ER is in place as the substitute tax benefit for those employee shareholders.

 

I am told by those in the know that the battle for ER may have already been lost and the next up for the axe could be Business Property Relief (BPR). If you feel strongly about this situation may I suggest you lobby your MP and, as part of that, tell him/her you did not vote Conservative to let Corbynesque policies in by the back door.

 

For further information view the Entrepreneurs Relief Cut blog by Stephen Hazell-Smith



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