Our Tax Expert Group, in conjunction with our Share Schemes Expert Group, has prepared its annual proposals for taxation reform ahead of the Autumn Statement and 2014 Budget. Our proposals are designed to help inspire private sector growth and employment through:
- Encouraging long-term investment and funding for growth
We suggest the removal of the arbitrary 5% threshold for CGT Entrepreneurs’ Relief in respect of shares held by employees/officers. This will encourage wider employee share ownership and align employee and management goals in driving growth.
We also suggest expanding this relief to long-term, patient investors in SMEs to recognise all stakeholders who make a meaningful and important contribution to growing businesses.
We believe that long-term investment could be further encouraged through reinstating the dividend tax credit for pension funds, which invest in growth companies.
- Creating a level playing field for equity and debt
We suggest that the costs of raising equity should be tax deductible in order to create a more level playing field and encourage more companies to raise equity. Case law in the VAT area already supports this principle, and aligning the direct and indirect tax treatment would achieve greater consistency in the tax system. We have included a comparison of tax treatment of raising equity across 17 European states, which highlights the UK’s extreme position on this matter.
- Creating a simple and reliable tax system
We are increasingly concerned that some areas of tax legislation impose a disproportionate compliance burden on small and mid-size quoted companies, including the worldwide debt cap rules, transfer pricing and size tests in tax legislation. We have included suggestions for how these areas could be simplified.
