From The Guardian:
The former head of HM Revenue and Customs has called on the government to scrap a controversial tax break designed to help entrepreneurs, which he said was costing the country £2bn a year in lost tax yet provided “no incentive for real entrepreneurship”.
Sir Edward Troup, who was executive chair of HMRC from 2016 until January 2018, said whichever party won the general election on 12 December should abolish the “entrepreneurs’ relief” applied to capital gains tax (CGT).
Troup’s intervention on Wednesday came in response to a Guardian report on Tuesday showing thousands of the country’s richest people were exploiting the policy to pay as little as 10% tax on billions of pounds’ worth of capital gains...
Troup, who is now a consultant at McKinsey, said there was a “very strong case for [whichever party won the election] to ramp down entrepreneurs’ relief immediately”.
Whatever your view, gut instinct tells me that if people build up a business from scratch and sell it, such gains ought to be taxed at a lower rate (aka Entrepreneur's Relief) than straight investment gains, which of necessity mainly accrue to the already wealthy. We can argue about the finer details later on (the £10 million limit for Entrepreneur's Relief seems excessively high to me, why not go back to retirement relief and just exempt the first £1 million or so and tax the rest at full rates?).
For some reason, this ex-HMRC head is homing in on Entrepreneur's Relief while missing the obvious targets.
1. Investor's Relief, which is a 10% CGT rate for people who in subscribe for new shares in the right kind of company, and
2. SEIS, EIS and VCT reliefs, which include a 0% CGT rate on shares (among many other goodies).
It's those two items which are designed to - and do - benefit the already wealthy, not Entrepreneur's Relief.
How the heck he ended up running HMRC is a mystery to me, he'd have failed the most basic tax exam. And presumably McKinsey took him on for his other marketable skills. Maybe he knows how to unblock paper jams in printers or something?
Thursday, 7 November 2019
Ex-HMRC head goes through revolving door; forgets everything he ever knew (or should know)
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8 comments:
FFS. What a nasty little plonker. If anything scrap CGT on all true entrepreneurs gains (and especially exempt (non) gains arising if you go from a sole trader or partnership to a limited company for operational reasons).
Set up a crap system and then you have to open up loopholes everywhere to mitigate the damage. In the end you end up with a holey garment.
The tax system is like an attempt to collect smoke in a fishing net.
And then there's 0% CGT on primary residences... It's like the system goes from highest taxes on the most valuable activities down to 0% on the least valuable
L, agreed in principle, but as a matter of fact, you can hold over latent capital gains if you transfer your sole trader/partnership business to a limited company. There are lots of forms and faff, but it is perfectly normal. The other way round is a no-no (for reasons unclear to me or anybody else).
Ph, yes.
M, it's not "like", that is the system. That's intentional.
"Ex-HMRC head goes through revolving door; forgets everything he ever knew (or should know)"
That's a bit harsh: surely the first thing he learned as head of HMRC is that tax breaks are for the rich and taxes for the poor. Now that he is installed in his comfortable McKinsey sinecure, he can speak out about what he sees as a tax break for the little man and thus against the natural order of things.
MW. I know about the holdover stuff. But it's still a bad tax on 'wealth creation', as opposed to a good tax on 'rents'.
B, do you think they are so cynical that they'd get rid of Entrepreneur's Relief (which benefits or at least motivates the small business owner) and retain SEIS/EIS reliefs and Investor's Relief (which benefit the already wealthy)?
L, of course. Which is why I like the old Retirement Relief, where the first £750,000* of gains were exempt (and the rest taxed at normal rates). The thought (more precisely 'illusion') of making £750,000 'tax free' is enough to motivate most small business owners to start in the first place and keep going; that's an achievable target. Everything above that is largely luck.
* We'd have to index that up to £1 million or £1.5 million nowadays.
Mark, yes.
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