Capital Gains Tax Relief on the Disposal of Business Assets: A Clear Strategy for Encouraging Entrepreneurs?

摘要

The United Kingdom is now living through one of the longest recessions since the Second World War, with the main object of the Coalition Government being deficit reduction. Over the past two years, there have been substantial cuts in the public sector, and it is thus clear that the growth that is needed to fill that gap and bring us out of recession will have to come from the private sector. The suggestion is that now, more than ever, the United Kingdom needs entrepreneurs in particular and small and medium enterprises (SMEs) more generally to create jobs in order to kick-start the economy. Indeed, the recently appointed minister of state for business and enterprise, Michael Fallon MP, said that there should be a change in culture so that wealth creators should be "saluted" rather than be penalised by the imposition of high rates of tax. There are a number of measures currently on the statute book aimed at encouraging entrepreneurs and those that invest in new businesses, including the venture capital trusts (VCTs) legislation, the enterprise investment scheme (EIS), the Seed Enterprise Investment Scheme and research and development (R & D) credits. The first three of these attract both income and capital gains tax relief, while the last is given by way of capital allowances. However, this article considers three reliefs, namely retirement relief, taper relief and entrepreneurs' relief, that are solely concerned with reducing the burden of capital gains tax (CGT) on the occasion of retirement from, or sale of, a self-owned business, as well as the sale by others of shares in a business. In particular, it analyses the way in which they were introduced and then developed to ascertain whether successive governments have had a clearly defined policy of actively encouraging entrepreneurs through the use of such reliefs. A further consideration of whether the reliefs have actually - had that effect and whether they are the right tools for the job will enable conclusions to be drawn about how the Government may better encourage in the future the type of behaviour that will help the economy to grow.