I confess I was lunching at L’Escargot in Greek Street as Rachel Reeves delivered her Budget. My excuse was that I thought I already knew what was in it – but in reality the package was even more anti-business than I feared. My punishment was a risotto too glutinous to finish, but the Chancellor’s 76-minute sermon proved just as indigestible when I tuned in later. Like the wild mushrooms in my dish, the more pungent Budget measures had to be picked out of a blander mass – and I was roused from postprandial torpor by a call from a veteran entrepreneur, regularly quoted here under a variety of disguises, in a fury at one such small-print item.
I warned two weeks ago that Reeves might be eyeing the Enterprise Investment Scheme which attracts capital for private companies but is often gamed by wealthy tax avoiders. Having read the column, I’d like to think, she steered away – but instead attacked ‘investors’ relief’, which allows a lower rate of capital gains tax to be paid on some sales of shares in unlisted companies. The new measure reduces the lifetime limit for ‘IR qualifying disposals’ from £10 million of gains to just £1 million, while raising the applicable CGT rate from 10 to 14 and eventually 18 per cent.
That’s the plainest possible disincentive to serial investors in the sort of early-stage ventures that strive to put the UK at the forefront of technological advance – but more often fail, taking investors’ cash with them, as has just happened to the Oxfordshire-based hypersonic aviation pioneer Reaction Engines.
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