Association of Accounting Technicians (AAT) who have over 140,000 members, including 4,250 licensed accountants who provide tax and accountancy services to more than 400,000 British SMEs, have called on Conservative Party leadership contender Jeremy Hunt MP to scrap Entrepreneurs Relief if he is elected.
Despite the name, Entrepreneurs’ Relief does not just provide tax relief for entrepreneurs, any sole traders and business partners who have owned their business for at least two years, can pay substantially less Capital Gains Tax when all or part of the business they own is sold providing they met some relatively simple qualifying criteria.
Entrepreneurs’ Relief means tax at only 10% on all gains on qualifying assets is paid.
Jeremy Hunt has gained considerable media and public attention for his frequent references to his own entrepreneurial credentials, so he appears well placed to consider the idea.
AAT focus groups have consistently found that clients of AAT members are unaware of Entrepreneurs Relief until the time comes to consider a sale – largely demonstrating that this £4bn tax relief does nothing to initially encourage entrepreneurialism but instead unnecessarily rewards those who would have sold their businesses anyway.
Despite the findings of its focus groups, AAT acknowledges that some serial entrepreneurs will be aware of the relief and do take advantage of it. However, they are in the minority and AAT questions whether serial entrepreneurs are likely to be discouraged from reinvesting simply due to the removal of this tax relief.
Phil Hall, AAT Head of Public Affairs & Public Policy said, “The Government is absolutely right to want to encourage entrepreneurialism but despite the name, this isn’t successfully achieved through Entrepreneurs Relief. AAT has long recommended that this expensive, misguided, ineffective relief be scrapped, and that the savings be invested in other entrepreneurial activity, for example, measures that encourage small businesses to scale-up rather than sell-up.
If Jeremy Hunt is serious about wanting to encourage entrepreneurialism, committing this £4bn of relief to helping small businesses grow and prosper would be a far better investment for UK plc than actively encouraging business owners to simply sell-up.”
AAT is not alone in seeking reform. Last year, both left leaning and right leaning Think Tanks called for the relief to be scrapped and the independent Office for Tax Simplification (OTS) published a comprehensive Business Lifecycle Report which clearly stated Entrepreneurs’ Relief does not achieve its original objective i.e. it does not encourage entrepreneurialism.