On 14 October, the Association of Accounting Technicians (AAT) submitted a Budget submission calling for entrepreneurs’ relief to be scrapped because there is no evidence that it encourages investment. A new report by the IFS has also lent support to this view.
The AAT quotes an HMRC research report from 2017, as well as the recent OTS business lifecycle review, both of which indicated that for the overwhelming majority of those who claimed entrepreneurs’ relief, this relief provided no real incentive to invest.
The AAT has evidence that businesses are often unaware of entrepreneurs’ relief until the time comes to consider a sale, suggesting the relief does less to encourage entrepreneurialism than reward those who would have sold their businesses anyway.
New research by the IFS indicates that company owner-managers respond to changes in income taxes by adjusting how and when they take money out of their company and not by changing the amount of income they create, or how much they invest. Entrepreneurs’ relief costs the government £2.4bn a year relative to taxing gains at the full CGT rate, and the report suggests that owner-managers often retain income in their companies for long periods and until liquidation, in order to access the relief.
The IFS report Intertemporal income shifting and the taxation of owner-managed businesses, is available at bit.ly/2P8Gum3.
AAT head of public affairs and public policy, Phil Hall, commented: ‘The government is absolutely right to want to encourage entrepreneurialism but is wrong to believe that entrepreneurs’ relief is a good way to do this. There is now an overwhelming body of evidence to suggest that the relief is not achieving its policy objectives, that it’s extremely expensive, misguided and ultimately ineffective.’
IFS director, Paul Johnson, tweeted: ‘Retaining entrepreneurs’ relief in CGT supposedly to support entrepreneurship. But despite its name it doesn’t. It does give a relief worth an average of £300,000 to just 6,000 people each year.’
The AAT joins think tanks the Resolution Foundation and IPPR in recommending that entrepreneurs’ relief should be scrapped.
On 14 October, the Association of Accounting Technicians (AAT) submitted a Budget submission calling for entrepreneurs’ relief to be scrapped because there is no evidence that it encourages investment. A new report by the IFS has also lent support to this view.
The AAT quotes an HMRC research report from 2017, as well as the recent OTS business lifecycle review, both of which indicated that for the overwhelming majority of those who claimed entrepreneurs’ relief, this relief provided no real incentive to invest.
The AAT has evidence that businesses are often unaware of entrepreneurs’ relief until the time comes to consider a sale, suggesting the relief does less to encourage entrepreneurialism than reward those who would have sold their businesses anyway.
New research by the IFS indicates that company owner-managers respond to changes in income taxes by adjusting how and when they take money out of their company and not by changing the amount of income they create, or how much they invest. Entrepreneurs’ relief costs the government £2.4bn a year relative to taxing gains at the full CGT rate, and the report suggests that owner-managers often retain income in their companies for long periods and until liquidation, in order to access the relief.
The IFS report Intertemporal income shifting and the taxation of owner-managed businesses, is available at bit.ly/2P8Gum3.
AAT head of public affairs and public policy, Phil Hall, commented: ‘The government is absolutely right to want to encourage entrepreneurialism but is wrong to believe that entrepreneurs’ relief is a good way to do this. There is now an overwhelming body of evidence to suggest that the relief is not achieving its policy objectives, that it’s extremely expensive, misguided and ultimately ineffective.’
IFS director, Paul Johnson, tweeted: ‘Retaining entrepreneurs’ relief in CGT supposedly to support entrepreneurship. But despite its name it doesn’t. It does give a relief worth an average of £300,000 to just 6,000 people each year.’
The AAT joins think tanks the Resolution Foundation and IPPR in recommending that entrepreneurs’ relief should be scrapped.
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