Dragons' Den stars warn coalition over capital gains tax 'betrayal'

15th May '10 by Isaac

13 comments 3947 reads

Theo Paphitis and Deborah Meaden, two of the Dragons from the BBC's Dragons' Den, have warned the Government that any increase in capital gains tax on business assets would be a “betrayal” and would cost jobs.

Theo Paphitis, the retail entrepreneur, said any move to increase capital gains tax (CGT) from 18pc on entrepreneurs would be a "betrayal".

"To get this wrong would be to fall at the first fence," he said. "We need to incentivise people to invest long term in the UK, create jobs.”

He added: "I think 18pc is too high. It should be 10pc and people should have to hold those assets for a minimum of five years and should create employment. People who are spivving on the stock market or buying property that's not creating employment can pay 50p in the pound."

"It will make a big impact on how I invest in the UK. I might be looking to invest somewhere else. But it would be such a betrayal of the future of the country that I don't think it will happen,” he said.

Fellow Dragons' Den star and leisure industry entreprenuer Deborah Meaden agreed that raising capital gains on business assets would "discourage entrepreneurs, particularly to make the long term investments that this country needs".

The Government is also expected to lower the starting point for CGT on non-business assets from £10,100 to around £2,500.

http://www.telegraph.co.uk/finance/businesslatestnews/7722726/Dragons-Den-stars-warn-coalition-over-capital-gains-tax-betrayal.html

I plan to vote out these spivs/chavs (whatever you want to call them) from government in the next general election! What I would favour is a rise in VAT to say 25% and perhaps a 5% VAT on food to pay for this mess the country is in. At least then I can choose not to consume.

Or even better take the troops out of Afghanistan...What is the point in going to war in a 3rd world country killing innocent people and at the same time British soldiers dying? They increase taxes to carry out these stupid acts when this country is in such a mess!

Why don't the British people just stand up and Rebel against this? Looks like it is time to look elsewhere to Invest.......No way will I be happy to pay 40% tax on gains over £2500.…

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Isaac

16th May '10

Coalition government plans to double capital gains tax (CGT) – possibly including Lib Dem proposals to cut the threshold from £10,100 to £1,000 – are "legalised theft"

Investors with substantial portfolios of property and/or shares who have not protected them in tax shelters – such as trusts, individual savings accounts (Isas) or pensions – face the daunting possibility that HM Revenue & Customs (HMRC) may grab half their gains.

This could destroy many people's plans to use buy-to-let portfolios or shares accumulated over long periods of time to fund retirement. So I quote below two of the most helpful analyses I have seen of what investors holding portfolios pregnant with gains can do to ease the pain.

Paul Killik of stockbrokers Killik & Co pointed out: "The timing of the proposed change remains uncertain. We are promised an emergency budget within 50 days. It is possible that the changes could start immediately, or they could be backdated to the start of this financial year, or they could take effect from April 6, 2011.

http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/7727650/Coalition-government-how-to-beat-a-rise-in-capital-gains-tax.html

The HOUSING MARKET is going to crash...Mark my words!

I wonder what impact it will have for HMRC when they recieve thousands or more tax returns as a result of people making capital gains higher then a £1000.

I thought the government wanted to cut public spending?

Sadly Andrew Marr did'nt let Camron full speak when asked about CGT......

The Lib Dems also want the CGT-free allowance of £10,100 — the amount you can make without paying CGT — to drop to £2,000. Though the Tories have not yet agreed, this would increase the number paying CGT from about 250,000 to 1m, said Deloitte, the accountant. Lucy Hardwick at Deloitte said: “Bringing the annual exemption down to £2,000 would quadruple the number of people inside the CGT net.”

Savills, the property broker, has also seen a rise in inquiries from buy-to-let investors. Paul Williams of Savills said: “A client with a £1m property faces tax on £800,000 worth of gains. This is a pension investment that he’s held for a long period. The choice between 18% and a possible 40% is a no brainer — he’ll be selling.”

http://www.timesonline.co.uk/tol/money/investment/article7127517.ece

Fangorn

All rather discouraging imv.

What happened to encouraging people to save and invest for their retirement? Threshold of 2000 pounds is ridiculously low, and looks like nothing more than the Libdem's Left wing policy of envy coming to the fore. And for the Tories to be even considering sanctioning such a move - they're looking less and less like Tories with each passing day.

Raising CGT to 40-50%,and reducing the threshold simultaneously to 2000 will do nothing but damage to those most likely to invest prudently in an effort to provide for themselves in later life in this country with resultant knock on effects to the rest of the country.If the government is going to screw my ability to save then I am not going to work as hard to earn as much, nor consume as much which will , if others follow suit, lead to falling Vat revenues amongst other things.

Whilst I'd rather CGT didn't go back to 40-50% they should, imv, return us to how we were pre 1997. 40% CGT and indexation relief/tapering scale for the number of years an asset was held.That is more than acceptable - 18% was always way too low.

djpreston

Playing devil's advocate here but why shouldn't gains be taxed the same as income? You have to make a gain to pay tax after all.

I guess the answer to that is that you are putting your capital at risk and so, unlike "work" you do have the scope for loss (other than time invested in "working"). So tweeking the rate or method of calculation seems sensible - perhaps allowing a relief against losses of the same rate? Ie loose 50k and get an income rebate of 25k (assuming a 50% cgt rate). Okay, you could argue that happens already with losses offset vs gains but this would allow an immediate relief.

Anyway, for a lot of people, having the ability to shelter 10k per annum in ISAs is likely to be enough in terms of cgt protection - 20k per couple per annum over 10 or 20 years and you are talking real money (plus any growth in the value of the investments sheltered).

Nope, I can see no real reason for the serparation of cgt and income tax. If someone has no "income" fro work then gains on investments will be taxed as income - seems fair enough.

Mind you, it is a real pain for me as a broker - what do I do with clients with massive inbuilt gains. One, for example, has well over 7 figures of gain on a long held position. Do I strongly recommend selling and paying 18% now or just tell them to hold till they die and then have the gain extinguished (and pay IHT).

fuiseog

If gains are taxed the same as income it would seem fair to allow CGT losses against income for tax purposes.

Of course, if you desperately need the dosh because the last idiot at the wheel was too petrified by electoral choppy seas to turn the wheel, then survival may take precedence over fairness.

Maybe your client needs to take a prolonged trip abroad?

fuiseog

arkleseizure

Out of curiosity Fuseog, where should Darron's client go, and for how long?. If (in the unlikely event, 1 in 20?) Goldman's best case scenario for SIA works out, I may consider such a trip myself!. Dont fancy Belgium though.

Hong Kong.

16% flat tax across the board. :)

Or Singapore, if you prefer better summer weather all year round.

22% tax last I looked.

Too hot and humid 365 days a year for my liking though.Prefer somewhere with four seasons.

Regretfully it's not immediately relevant to me, and I'm no expert, but did I see on a board somewhere that NZ has no CGT?

fuiseog

And you get the amazing scenery to boot (as per the recent Lord of the Rings epic!)

Unfortunately it is at the end of the world (: Way too far from civilisation, as is OZ. Timezones make it nigh impossible to keep in contact with family and friends back home. Otherwise I'd be there in a shot.

winks

17th May '10

If people with massive inbuilt gains do start selling before the CGT rises, will this have a serious effect on the share price of small cap companies, such as some of the oil E&P companies discussed here, in the next financial year?

doverbeach

There is a difference between selling and getting out of the market. I have been selling off old emerging markets ITs this calendar year but switching into comparable ETFs, so I have realised the profit (ouch) but maintained broadly the same position.

Dragons' Den stars warn coalition over capital gains tax 'betrayal'

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Isaac

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