Entrepreneurs’ relief for smaller businesses costs just £600 million, new analysis finds

Entrepreneurs' relief

The Federation of Small Businesses (FSB) calls on the government not scrap to entrepreneurs relief scheme

Following reports that the Chancellor is considering the removal of entrepreneurs’ relief – which allows small business owners to keep more of the proceeds of selling their firms – new analysis from the Federation of Small Businesses (FSB) shows that the annual cost of the incentive to the Treasury could be reduced by three quarters if it was concentrated on business sales of under £1 million.

In the financial year 2017-18, entrepreneurs’ relief cost the Treasury £2.3 billion. Of the 43,000 individuals that made use of the incentive, 38,000 claimed relief on business sales of under £1 million, coming at a cost of only £600 million to the Treasury.

FSB also today highlights the example of Ireland where those over the age of 55 do not have to pay capital gains tax on disposals of businesses or farms up to the value of 750,000 euros.

FSB National Chairman Mike Cherry said: “Scrapping entrepreneurs’ relief would destroy the retirements of thousands of business owners. The Conservative manifesto committed this Government to reviewing and reforming this incentive, not scrapping it entirely. The Conservatives should keep their promises – it’s a question of trust.

“The solution is obvious: keep the relief for the first £1 million of a business sale and scale it back at the top end. Doing so would save the Treasury more than £1 billion and maintain a vital incentive which encourages entrepreneurs to start-up, hire and invest.

“A lot of entrepreneurs see their business as their retirement plan. They don’t have the gold plated pensions enjoyed by Treasury civil servants.

“Small business confidence has suffered an unprecedented 18-month slump. Scrapping entrepreneurs’ relief will make a bad situation worse.

“Fundamentally we want to make the UK a more, not less, attractive place to start-up a business. If this incentive goes, we risk losing entrepreneurs to other climes.”

 

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