Britain’s Financial affairs Minister Rachel Reeves has pledged to make the “necessary”, “urgent” and “incredibly tough” choices to restore the provinces’s economic stability.
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LONDON — British technology bosses and investors are forewarning that entrepreneurs may be forced to leave the U.K., if the government moves forward with controversial plans to raise capital farther away froms tax on share sales.
Recent media reports have suggested Finance Minister Rachel Reeves is planning to hike head gains tax (CGT) — which applies to the profit investors make on the sale of an investments — with The Guardian saying the levy could upsurge to 39%. Last week, U.K. Prime Minister Keir Starmer told Bloomberg that such speculation was “wide of the stamp.”
Reeves is expected to announce sweeping fiscal changes during her Oct. 30 budget, as she seeks to close a multi-billion funding gap in business finances.
The government is also planning to increase capital gains tax on shares and other assets by “several percentage marks,” the Times reported, meaning that those who sell their stakes in an acquisition, initial public offering or unoriginal share sale will be taxed on any gain in value.
Reeves also plans to cut the so-called business asset disposal contrast (BADR), which allows entrepreneurs to pay a reduced 10% tax on profits from the sale of their firms, Bloomberg create.
CNBC has not been able to independently verify these reports. A Treasury spokesperson told CNBC the government doesn’t animadversion on “speculation around tax changes outside of fiscal events.”
Several entrepreneurs and investors have warned that the U.K. could accept an exodus of technology entrepreneurs as a result of the reported tax changes.
In an open letter to Reeves earlier this month, more than 500 entrepreneurs accelerated the finance minister to resist calls to hike capital gains tax or restrict the business asset disposal relief course of action.
“Higher CGT or any restrictions on BADR would make this relief less competitive at a time when the rest of the happy is making their reliefs more competitive,” read the letter, published by The Entrepreneurs Network on Oct. 13.
“It would mean the UK has the second-highest CGT scale in Europe, and jeopardise the success of our country’s startup ecosystem by enormously weakening the incentive individuals have to build partnerships.”
The list of signatories includes the likes of Giles Andrews, co-founder of digital bank Zopa, Rishi Khosla, CEO of commerce platform OakNorth, and Victor Riparbelli, boss of artificial intelligence firm Synthesia.
They suggested that the lay outs would make it harder for entrepreneurs to build businesses in the U.K. — or indeed, force entrepreneur out of the country.
“By discouraging entrepreneurs from starting and ripening their businesses, HM Treasury could well end up lowering the tax take overall,” the letter said.
“I’ve noticed a rising coherence of stress in the U.K. tech ecosystem over proposals like this. If implemented, such a move would send a far downwards negative signal,” Adam French, partner at seed investors Antler, told CNBC by email.
“There is a unfeigned risk of complacency in U.K. tech, in tandem with increasing competition from Paris and Berlin for talent, and a brain thrown away to the U.S.,” French added.
Harry Stebbings, a venture capitalist known for popular tech podcast “The Twenty Document VC,” told The Guardian newspaper last week that entrepreneurs would leave the U.K. if the government raises capital harvests tax.
Calling the government’s plan on capital gains tax the “biggest” issue for entrepreneurs, Stebbings said: “I know fewer entrepreneurs thinks fitting be here. They will leave en masse.”
Not everyone agrees that capital gains tax shouldn’t be increased to pick through public finances.
In a report by the center-left Institute for Public Policy Research published last week, a group of millionaire question owners said they would welcome an increase in the rate levied on capital gains to match the higher be entitled to of income tax.
The analysis found that capital gains tax was not a primary driver of investment decisions, with entrepreneurs assorted focused on issues like access to financing, market opportunities and broader economic conditions.