Entrepreneurs will flee the country if the government goes ahead with plans to increase capital gains tax, the boss of Britain’s biggest online supermarket has warned.
Tim Steiner, chief executive of Ocado, has said that such a move would be “very damaging” for the country. He also called for an extension of tax breaks for employee ownership and entrepreneurs when they sell their companies.
“If you start a business and there’s a 20 per cent capital gains tax regime, if capital gains tax moves to 45 per cent, you’ve got to make an extra 45 per cent increase in the value before you’re going to end up with the same amount of money,” he said at an event organised by the Centre for Policy Studies, a centre-right think tank.
He said that the plan would encourage entrepreneurs to sell their businesses before the tax rise comes into force or to sell their stakes. “Or you leave the country, that’s the other option,” he added.
Steiner, 51, is the latest business leader to voice his opposition to plans to align capital gains rates with higher income tax levels. Rishi Sunak, the chancellor, ordered a review into such measures in July.
A report from the Treasury’s Office of Tax Simplification also suggested lowering the threshold for paying the tax and curtailing business asset disposal relief, a tax break for entrepreneurs. It said that the changes could raise £14 billion for the public purse.
However, businesses have warned that the move could stifle the economic recovery and trigger an exodus of entrepreneurs. Steiner, a former Goldman Sachs bond trader who co-founded Ocado in 2000, said that entrepreneurs were already leaving the country.
“I understand the motivation to raise taxes. I understand people thinking this isn’t fair and that isn’t fair. But we’ve got to look at this on a global basis and you can go to other countries and do things at other rates.
“We need to encourage people to come to the UK, we need to encourage people to stay in the UK and we need to encourage people to grow big businesses in the UK.”
He called on the government to expand business asset disposal relief for entrepreneurs. The relief means that people selling all or part of their business qualify for a reduced capital gains rate of 10 per cent on qualifying assets under certain conditions. The relief, which costs the taxpayer about £2 billion a year, has been criticised as ineffective and expensive.
In order to qualify, entrepreneurs must hold at least 5 per cent of the ordinary share capital of the business. Steiner said that the threshold should be lowered. He also called for an expansion of the share option scheme, which allows employers to grant individual employees up to £30,000 of shares tax-free. Steiner said that the one-off allowance should be replaced by an annual allowance.
