The Quoted Companies Alliance pushes for capital gains tax reform to encourage long-term investment

17th January 2012

The Quoted Companies Alliance, the representative body for the UK’s small and mid-sized quoted company sector, urges the Chancellor to focus on reforming capital gains tax Entrepreneurs’ Relief in the upcoming Budget announcement.

In its annual proposals for tax reform, the Quoted Companies Alliance pushes for everyone that makes a meaningful contribution to the long-term growth and success of a business to qualify for Entrepreneurs’ Relief, which reduces the capital gains tax rate from 28% to 10%. Currently, only those employees and officers that have a 5% shareholding can qualify, which penalises those working in a high-capital and high-growth business that attracts a great deal of outside investment.

The Quoted Companies Alliance proposes that the Government scrap the anomalous 5% requirement in order to stimulate growth in the UK economy by rewarding employees’ contributions in growing the value of the businesses they work for. To fund this relief extension and ensure it promotes long-term investment, the Quoted Companies Alliance suggests that the period that shares have to be held before qualifying for relief should be extended from one to three years.

The proposal also suggests rebranding Entrepreneurs’ Relief as ‘Stakeholders’ Relief’ through extending Entrepreneurs’ Relief to long-term investors in SMEs and introducing a holding period of five years for them so that businesses can attract and reward long-term investors’ support.

Other proposals for tax reform from the Quoted Companies Alliance cover simplifying tax rules to encourage economic growth, increasing investment and liquidity and creating a level playing field for equity and debt.

Tim Ward, Quoted Companies Alliance Chief Executive, comments: “With the Government focused on growth, now is the time to explore how appropriate and well-designed tax reliefs can encourage and support this. All of our proposals for the Budget are aligned with current Government aims to promote long-term investment and simplify the tax system – and even include suggestions as how to fund them. This is not just another Budget ‘wishlist’ – it’s a pragmatic and strategic plan for tax reform to encourage growth.

“Our key proposal to extend and rebrand Entrepreneurs’ Relief is targeted at providing small and growing companies with the support they require to grow and create employment. The aim is to encourage long-term investment and help small and mid-sized businesses better incentivise their employees and align employee and management goals.”

Click here to download the release (pdf)

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