Last week we called on entrepreneurs to sign our letter on reported changes to Capital Gains Tax (CGT) which are expected in the fast-approaching Budget. More than 1,000 signatories later, plus coverage in Sifted, CapX, City A.M. and Yahoo Finance, this is – without a shadow of doubt – the issue that’s got Britain’s entrepreneurs riled up more than any other in recent years. For many, it’s even bigger than Brexit.
Our letter has been signed by founders who have collectively raised close to £7 billion (thanks to Beauhurst’s Henry Whorwood for crunching the numbers). We have 150 founders eager to speak with any journalist who wants to know what the big deal is.
We’re not the only ones working on it. Fintech Founders – a network of the UK’s leading fintech founders – has written its own letter to the Chancellor. Meanwhile, other groups are working behind the scenes and mobilising. As I wrote last week: the more, the mightier.
There are credible reports that Business Asset Disposal Relief (BADR) will be scrapped. This would be doubly brutal for entrepreneurs. Not just for them personally, but for the devastating impact on their employees who are incentivised under the scheme through stock options or shares. This is what makes people gamble on a plucky British startup rather than work for a US tech titan. Instead of scrapping BADR, the Chancellor should target it solely at entrepreneurs and their teams building companies, while increasing the limits from its diminished £1 million.
It’s important to note that this isn’t just a problem for the tech industry. Also signing the letter are Whitney Hawkings, the visionary behind FLOWERBX which brings blooms to your door; Pip Murray, whose flavour-packed nut butters have spread across the nation; Matthew McNeill Love, the brains behind Thursday, shaking up the dating game; and Alla Ouvarova of Two Chicks, which has revolutionised the way we enjoy eggs (and, for me, cocktails). I could go on, and on, and on (there are over 1,000, after all).
These are the thousand entrepreneurs who’ve poured their blood, sweat and tears into making all our lives a little better. While governments are there to set the rules, it’s the innovators and entrepreneurs – alongside those who back them and work for them – who really change the world.
If CGT is hiked for entrepreneurs as many fear, two things will happen. First, some entrepreneurs will leave the country. According to a survey by Evelyn Partners, 48% of business owners would consider moving their businesses abroad if taxes are increased. Similarly, the Fintech Founders letter claims 43% of founders are considering relocating out of the country.
Of course, no matter what happens on 30 October, we all know that half the country’s wealth creators aren’t going to suddenly up sticks and leave. But some will – potentially quite a lot, based on conversations I’ve been having with them. We don’t need to compete with jurisdictions that don’t charge any CGT – Britain is better than that – but we do need to be competitive with the continent and the US. We also need to show some humility before ripping up the policies that have made us the best place in Europe to start and grow a business.
Second, much more pernicious – and what won’t be so easy to see – will be the people who decide not to start a business in the first place. Why try to build a company to challenge a US tech giant when you can work for one? Why start a new bank when you can just work for one that’s already there? And if you are spinning your company out of a British university, why build it in the UK?
We all know personal wealth isn’t the only thing that drives entrepreneurs. But we all respond to incentives – or, as it may be, disincentives.