Businesses have criticised Gordon Brown’s proposals to change rules on private equity tax relief.
The Federation of Small Businesses (FSB) has warned the government that any plans for a change in tax law aimed at private equity firms could be damaging for small firms.
The prime minister recently expressed his desire to change policy on certain parts of the tax regime to ensure private equity was taxed at an appropriate level.
However, according to the FSB, ‘small businesses and entrepreneurs also benefit from taper relief on capital gains that could be targeted by these changes’.
The organisation said any changes proposed in the forthcoming pre-Budget report may stifle small firms’ ability to grow instead of addressing concerns about private equity.
“The government will have to tread carefully if it is not to hit small businesses in the crossfire of its proposed attack on the tax regime as it relates to private equity,” said
Bill Knox, FSB taxation chairman.
“The prime minister rightly speaks warmly about the British entrepreneur. However, any changes in the taper relief regime targeted at private equity risk hitting small businesses as well.”
Knox said moves to change tax policy on gains from private equity may prove counter-productive.
He added: “Few of the people who currently earn large amounts from private equity are domiciled for tax purposes in the UK anyway. But small businesses generate 50 % of UK GDP and do pay tax in the UK.”
© Crimson Business Ltd. 2007