A recent survey has revealed increasing apprehension among business leaders regarding the potential rise in capital gains tax (CGT). The survey, conducted among companies backed by BGF, highlights a widespread belief that such a tax hike could stifle investment within the UK.
The findings indicate that 88% of chief executives and company founders feel that a CGT increase would suggest a lack of governmental support for entrepreneurs. Furthermore, 74% of respondents anticipate that the tax hike would have a direct negative impact on their business operations. This view is reinforced by over three-quarters (78%) who believe that an increase in CGT would deter further investments, thereby posing a substantial threat to job creation and economic growth.
Andy Gregory, CEO of BGF, underscored the growing uncertainty prevailing within the business community. He cautioned that the potential increase in CGT could have serious repercussions for small and medium-sized enterprises (SMEs), which constitute a vital segment of the economy. Although the Treasury has not formally proposed a CGT increase, it remains one of the few major tax avenues available for potential hikes after other tax increases were ruled out by policymakers.
BGF, established in 2011 in the aftermath of the financial crisis, has invested £4 billion into over 600 businesses to date. This year’s investments alone amount to £309 million across 33 companies. Among these investments are well-known consumer brands. The organisation’s commitment to fostering growth and innovation is evident, yet the shadow of a possible CGT increase looms large.
Tech start-ups, in particular, are voicing their concerns about the ramifications of higher CGT rates on employees with share options. These share options are often employed as a mechanism to supplement salaries that may be lower than the industry average. Many in the tech sector fear that an increase in CGT would adversely affect employee motivation and retention, which are critical for the growth and stability of these businesses.
The survey also highlighted criticism of the government’s “make work pay” agenda, which aims to enhance workers’ rights, including protections against unfair dismissal from day one of employment and the right to disconnect from work communications outside of working hours. A significant portion of respondents (71%) believe that the current balance between employee and employer rights has tilted too far, potentially jeopardising the viability of smaller businesses.
A spokesperson from the Treasury declined to comment on the survey findings, citing a standard policy of not commenting on tax change speculations outside of official fiscal events.
In summary, the potential increase in capital gains tax raises significant concerns among business leaders and investors. The apprehension centres on the negative implications for investment, job creation, and economic growth, particularly within the SME and tech sectors. As the dialogue continues, the business community awaits further clarity from the government regarding its fiscal policies.