Is the Chancellors reduction in taper relief to small businesses finally the admission that Labour cares only about the public sector.
The Government seems to have introduced another stealth tax on small businesses when the Chancellor of the Exchequer Alistair Darling said he would abolish so-called taper relief on capital gains tax - which allowed private equity firms to pay as little as 10 per cent tax profits.
However the Chancellors proposed 18 per cent tax rate will be applicable across the board and will take its toll on small businesses.
Oddly the move could benefit second home owners and private investors who could possibly could pay much less tax on their capital gains.
The hard working small business owner who wishes to sell their business had the benefit of the 10% regime now find a further burden in the 18% proposal. When this is added to the many other difficulties experienced from the explosion in the property market which has led to many businesses selling their assets for the freehold value with little to no consideration for the business value and assets.
Many already closed and converted into residential properties, with the prospect of future owners, employees gone for ever, and a further nail in the coffin of services, suppliers to what is still one of the main areas for employment in the UK.
The unusually prolonged and high increases in property values in the UK has in some cases made business loans difficult to find for the purchase of freehold businesses as the small and medium business’s profitability has been hit by the unceasing attack from the government/treasury, this, added to the ever increasing rises in business rates, and minimum wage restrictions have made the profit and loss account of some businesses very sad reading. This is particularly true when presented for the application for loans to purchase the business, with many businesses net profit unable to realistically sustain the loan repayments required as the abnormal and constant revaluation of the bricks and mortar race well ahead of any sensible and rational forecast in the performance of the business and its profitability to maintain repayment.
While the large accountancy firms speak of the disincentive to the venture capital sector the fact is this proposal has far reaching effects on the small and medium size business and does little to encourage the entrepreneur spirit.
Although, and not surprisingly it does mean the government has managed another tax hike whilst claiming otherwise.
It is quite possible that the government’s insistence on paying themselves and the public sector rates very much in excess of the national average are a reason for the formidable array of taxes that have been placed on the UK residents.
But the real fact is the ‘black hole’ of the public sector pension liability becomes a bigger problem by the day, and with a government who sees it morally right to pay a national pension below the poverty level, whilst removing £5 billion from private pension plans, there maybe a case for the public sector pension to be at best frozen, perhaps even taken away completely, and replaced by a much higher national pension for all, but which is far easily regulated against inflation as opposed to wage/salary increases in the public sector that have averaged upto 7.7%
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