‘Back to school’ means different things to different people.
For my youngest, it means seeing his friends at school for the first time since March, for many others it means going back to work and, of course, it can also mean going back to relearn what has seemingly been unlearnt.
Maybe HM Treasury and Rishi Sunak could do with a trip back to school. Winston Churchill is quoted as having said:
“I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
The leaked suggestions that Capital Gains Tax could be raised to the same level as income taxes is, in my view, crazy. M&A activity for owner managers could drop dramatically; those that do sell may well leave the country to avoid the tax and, consequently, the actual tax take could drop. A double blunder: alienate your wealth generators and collect less cash, genius. When Labour dropped CGT for entrepreneurs, exiting business owners just paid the tax and stayed here in the UK where they then spent their gains on goods, business investment and employees. Oh, and the tax take went up.
Before this, M&A advisors worked hand in glove with clients and tax advisors as owners looked to find ways to avoid tax. A common one being the ‘Belgian trick’ – that is to say the clients moved to Belgium prior to completion, stayed there for three or four years and then returned, having saved many millions in tax. Many actually did not bother moving back and now live elsewhere in the world. The UK lost out on every count.
It is not just M&A that could crash. New investment is at risk too. Why invest in growing your business with 45% CGT? If you were to fail you lose, but if you win you have to pay half of it away. There simply has to be sufficient reward for entrepreneurial risk or it will not happen. The Brits are the envy of the world for our tech and swashbuckling spirit as we have so many new and growing businesses: the supportive tax environment is part of this.
So, Rishi and friends – we are already being hit by Brexit and Covid, please don’t give us all a final kicking with tax.
In the meantime, if you are thinking of selling anytime soon please give us a call. We may well be able to secure you an exit at the current tax rates. Time may be short but many things are still possible.
Usually I try and meld in our monthly blogging into my note. With Rishi’s potential tax bombshell that is not so easy. So read here about Chris’ views on the importance of being persistent (he just completed an epic cycle race), Bhav’s commentary on how technology is evolving online retail to new heights, and Oli asks how cool is your house? – As he looks at how tech is changing the way our houses are built as new materials are developed. Finally, I have challenged you to look at how your board is comprised and written a piece on CBILS. You have until the end of the month to secure this great value funding.
Here at Polestar we are back at school so if you fancy a coffee do let us know and we can talk through the state of the nation and the opportunities that are available to you now
If you are thinking of selling anytime soon please give us a call. We may well be able to secure you an exit at the current tax rates. Time may be short but many things are still possible.