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Company Formation Sector to get CGT Relief

When the coalition government first announced its plans to devise an Emergency budget with the objective of addressing the country’s massive budget deficit, the small business and company formation sector immediately anticipated that the budget would include a VAT increase.

Forums were full of small business owners explaining their fears that the long term impact of a VAT tax increase would damage their businesses beyond repair and economists warned that increasing VAT at such a critical stage of the UK’s economic recovery could risk a ‘double-dip’ recession.

However, while the SME sector and the majority of the media focused on the impact of a VAT increase, they largely ignored what long term impact raising Capital Gains Tax would have on enterprise. That was until a certain Lord Sugar explained how an increase in CGT would stunt the UK’s economic recovery by discouraging investment in enterprise, despite the governments pledge not to increase CGT on ‘entrepreneurial activities.’

While the Chancellor did, as predicted, increase CGT, he showed his understanding for the fact that Britain’s economic recovery would be ‘enterprise led’ and therefore reduced the amount of CGT entrepreneurs would have to pay.

On the whole, many small business owners have welcomed the fact that the chancellor has listened to feedback from the SME sector and used it to inform the Emergency Budget, however, some still feel that the VAT increase is an ill considered and short sighted economic strategy.

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