Quoted Companies Alliance Budget Representations 2016

16th October 2015

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Our Tax Expert Group in conjunction with our Share Schemes Expert Group has prepared its annual proposals for taxation reform ahead of the Autumn Statement and 2016 Budget. Our proposals are designed to help inspire private sector growth and employment through:

Encouraging long-term investment and funding for growth

We suggest the removal of the arbitrary 5% threshold for CGT Entrepreneurs’ Relief in respect of shares held by employees/officers. This will encourage wider employee share ownership and align employee and management goals in driving growth. 

We also suggest expanding this relief to long-term, patient investors in SMEs to recognise all stakeholders who make a meaningful and important contribution to growing businesses.

Further employee share ownership could be encouraged by relaxing some of the requirements of the Company Share Option Plan (CSOP), as suggested by the Office of Tax Simplification.

We believe that long-term investment could be incentivised through reinstating the dividend tax credit for pension funds, which invest in growth companies.

Creating a level playing field for equity and debt

We suggest that the costs of raising equity should be tax deductible in order to create a level playing field and encourage more companies to raise equity. Case law in the VAT area already supports this principle and aligning the direct and indirect tax treatment would achieve greater consistency in the tax system. We have included detailed proposals of how this relief could work, as well as a comparison of the tax treatment of raising equity across 19 European countries, which highlights the UK’s extreme position on this matter. We estimate the cost to the Exchequer in any year to be approximately £80m.

Creating a simple and reliable tax system

We are increasingly concerned that some areas of tax legislation impose a disproportionate compliance burden on small and mid-size quoted companies, including the worldwide debt cap rules, transfer pricing and size tests in tax legislation. We have included suggestions for how these areas could be simplified.

We also propose that provisions are put forward regarding the tax treatment of employment income clawback; that the process of electronically registering employee share plans is improved; and that EIS companies are assisted in coming to market by allowing a new holding company to be created on top of an EIS company.

Click here to download our 2016 Budget Representations (pdf)

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