Entrepreneurs Organisation Speaks Out Against Brown Tax Reform

The controversial poll questioned 12 EO members (some of the UKís most promising young entrepreneurs, each with a turnover exceeding 1m) on the possible effects of the withdrawal of Taper tax relief in the UK.

According to the research conducted by EO London (www.joineo.com), the UK branch of the internationally recognised Entrepreneurs Organisation, the majority of British entrepreneurs would consider emigrating or become seriously demotivated if Taper relief were withdrawn in the UK.

Members of EO London were asked íIf Taper relief were abolished what would you do?í. The negative impact of the withdrawal of Taper relief on entrepreneurialism was clearly revealed as a third (33.3%) of respondents indicated that they would consider emigrating immediately, while a further third indicated that they would consider moving in the future. The final third indicated that they would stay in the UK but that the removal of Taper relief would seriously demotivate them and stop them from starting companies in the future. Not a single respondent could say that it would not affect their motivation.

Taper relief works by reducing the tax rate imposed on capital gains for an asset at a rate that reflects how long you have held that asset and whether or not it is a business asset in nature. For example, if you have held a business asset for a decade, it has a 75% tax reduction on any capital gains made on it. If the asset was not a business asset it would only be reduced by 40%.

The Entrepreneurs Organisation is an international organisation with over 6,000 members and combined sales in excess of $85 billion. The UK branch, EO London is made up of 50 of the most successful young entrepreneurs in the UK. To be a member you must be a founder or major shareholder in a company with a turnover of at least 1m. The current combined turnover of UK members exceeds 100 million and the average member age is 32.

The 12 members polled run businesses with a turnover of 32m and employ over 250 people.

William Berry, Communications Chair for EO London, commented:

ìEO entrepreneurs have clearly expressed that although the environment for entrepreneurship in the country is reasonable at the moment, we should not be complacent about change.

Removing entrepreneur rewarding mechanisms like taper relief may result in an exodus of talent, reducing investment in UK business, and having a considerable negative impact on the British economy.

In addition, if entrepreneurs were to decide, en mass, that conditions in the UK were no longer favourable, we could see thousands of employees affected by job loss due to the removal of these businesses.î

Thoughts from some of the respondents follow:

Steven Smith, founder of Professional IT, commented: ìWith the state of this country and the ëkilling off of small businessí, I am already looking to move out of this country on the sale of my business. The [withdrawal of taper relief] just goes to re-enforce why my decision to move away is justified and why this government has effectively killed the goose that laid the golden egg...the entrepreneur.î

Evan Rudowski, founder of SubHub, commented: ìAs I already have dual US/UK citizenship, I would not want to subject my earnings to a less preferential tax regime. There are already significant hurdles to entrepreneurship in the UK and it does not make sense to impose further barriers. The Government should be reducing barriers to business creation and wealth creation for successful entrepreneurs. Entrepreneurs who make money are more likely to start more businesses and contribute further to the economy.î

Harry Lyon-Smith, founder of The Illustration Library, commented: ìThis would be demotivating. However what would happen is that companies would be established in trusts and from overseas etc. The tax loss to the exchequer would be far greater than currently.î

Robin Smith, founder of Host Universal, commented: ìPersonally I think there is too much ëshort-termismí and this has given entrepreneurs a bad name.î

Duncan Grossart, founder and MD of Image Source, commented: ìI feel very strongly about this.î

Kirk Pickering, founder of Square Foot Properties, commented: ìI am currently establishing two new ventures, both of which trade on British values but which conceivably could be based offshore. New businesses requiring equity investment have to be structured with international tax advantages in mind as, with globalisation, it is easy for investors to be flexible and mobile, and offshore!î

Ajay Mirpuri, founder of A J Collections, commented: ìThe UK is a marvellous place to start a business despite all of the unnecessary red tape that is involved. I feel the government should be doing more at the grass roots level to encourage entrepreneurship.î