Private equity should not be taxed more heavily as the money they are investing in UK entrepreneurs is often very high risk, an investor has claimed.
Sam Richardson, a director at E-Synergy, which invests in companies producing sustainable energy technology, is urging critics of private equity to reconsider their views on the UK tax system with regards to private equity.
He argues that the low levels of tax paid by private equity bosses ‘is defensible’ when the investments they are making is truly ‘risk capital’.
Also, Richardson says that the headline grabbing private equity buy-outs of large companies shouldn’t be confused with investment in early-stage business, which he says is of vital importance to UK entrepreneurs.
“The reason these tax efficient structures were introduced was to encourage investors to take risks by backing start-up and early-stage entrepreneurs and businesses,” Richardson said.
“There is still very definitely an equity gap at this end of the market and the need to encourage investors to fill this remains as strong as ever.”
“Any future change to the tax system must continue to provide incentives or the UK could quickly find that the innovation and entrepreneurialism that will provide the jobs and economic wealth of the future withers away,” said Sam Richardson.
His words follow a period of harsh criticism of private equity from politicians and trade unionists. However, so far, the government has refrained making changes that affect the sector.
Richardson said: “We welcome the fact that the new chancellor Alistair Darling has ruled out any knee-jerk changes but would urge him to thoroughly think through the consequences of any actions he is considering.”
© Crimson Business Ltd. 2007
