07 May 2010

BVCA welcomes new Government


Responding to the formation of a Conservative/Liberal Democrat coalition government and the publication of a Coalition Agreement, Simon Walker, Chief Executive of the BVCA, said:

"The BVCA welcomes the end to the uncertainty surrounding the election outcome and the formation of an administration which both commands a clear majority in the House of Commons and is committed to a credible deficit reduction plan, focused on the control of public spending, an exercise which, rightly, will start this year rather than be deferred. This outcome is manifestly preferable to either a single-party minority administration which might fall at any moment or a multi-party "Rainbow Coalition" which would have been even more insecure.

There is much in the Coalition Agreement to be applauded. The text does, though, refer to the ambition of cutting personal allowances on income tax for those on low and middle-incomes by raising revenues from "taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities."

The BVCA would caution against the assumption that any increase in CGT would produce enhanced revenues that could be used to reduce taxation elsewhere. Britain already has a relatively high rate of CGT (in Australia, New Zealand, Holland, Hong Kong, Switzerland among other countries the rate is zero) and the last time that a Government here raised the rate of CGT from 10% to 18% (Labour in 2007), the revenues accumulated fell sharply from £5.3 billion in 2007/2008 to £2.5 billion in 2009/2010.

The BVCA will, therefore, be actively engaging with ministers to urge them not to make hasty decisions in this complicated area. The emergency budget to be held within 50 days is designed to deal with the spending cuts required this year to offset the proposed National Insurance increase next year and it would be unwise for it to involve Capital Gains Tax now. The BVCA will, furthermore, be emphasising to the Government that the positive role that private equity and venture capital are playing in the recovery plainly means that capital gains here should be considered to be "business" (it would be bizarre if it did not) and the "generous exemptions for entrepreneurial business activities" should obviously be applicable to both the private equity and venture capital sectors as well.

The BVCA looks forward to working with the new administration to enhance the current recovery and being part of a debate about the restructuring of the UK economy in the years ahead."



Notes to editor
  1. The British Private Equity and Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has approximately 520 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.

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