Increasing the rate of capital gains tax (CGT) would have a ‘devastating effect’ on entrepreneurs, Lord Sugar told the House of Lords today.
The Amstrad founder and star of The Apprentice made the comments during a debate on the effects of government policies on small businesses ahead of next week’s emergency Budget.
The Conservative-Lib Dem coalition has spoken of its intentions to bring CGT rates for ‘non-business assets’ in line with income tax levels to tackle the deficit, which could see the current rate of 18% increased to 40% or even 50%.
Although the government has promised ‘generous exemptions for entrepreneurial business activities’, it has faced criticism for failing to expand on what will qualify for these concessions.
Lord Sugar said he hoped his debate had not come too late to influence the chancellor’s plans on CGT which are widely expected to be announced during the Budget on Tuesday.
The current £2m tax threshold known as entrepreneurs’ relief was also called into question by Lord Sugar who said it fell short of the “aspirations of real growth companies, especially those in the technology sector”.
He said the “big payout” after a business sale was the “ultimate goal” for entrepreneurs and their employees, and raising CGT would discourage staff who had been incentivised with share options.
He added: “Most devastated will be those business or asset owners who have worked honestly and hard all their lives and are reaching an age where they are considering a sale.”
Earlier this month, nearly 100 members of entrepreneurial organisation The Supper Club, signed a letter to the chancellor voicing their concerns on potential CGT rises.
The letter insisted any rise would “penalise those most likely to facilitate a recovery: the entrepreneurs (and their investors) behind our fast growing businesses, the only likely source of new job creation in view of public sector cutbacks.”
© Crimson Business Ltd. 2010