Tax ‘will drive bosses to sell’

Jan 15 2008 by Iain Laing, The Journal

CHANCELLOR Alistair Darling risks creating a destabilising rush of small business sell-offs unless he opts this week to reverse his planned reform of Capital Gains Tax, according to the North-East Chamber of Commerce.

Mr Darling announced late last year plans to abolish the taper relief on capital gains in an effort to simplify a system blamed for allowing private equity firms to pay less in tax than their secretaries.

But NECC fears the move has sparked a rush by smaller entrepreneurs to offload their companies or face paying 22% more tax on the eventual sale price of their businesses.

It predicts a number of company owners will be forced to make premature decisions before a business has reached its potential under their leadership and it says the law changes could also see many successful businesspeople dissuaded from pursuing new ventures because the potential benefits are outweighed by punitive tax.

NECC director of membership and policy Andrew Sugden said: “NECC is one of a number of organisations that have sent a loud and clear message about the punitive impact of this tax increase.

“We hope Alistair Darling has been listening and that he will pull back from these reforms.

“Taken with the increase in corporation tax for small businesses and empty property rates, this is the third tax change in a year which will have major implications for many of our members.”

The chamber says owners and managers of small businesses looking to raise money by selling equity in their businesses would be hard hit. The move would also affect employees in share-save schemes.