On Monday, Chancellor John Healey will give his first big speech. Everything briefed about it says it will focus more on vision than policy. That’s fair enough; we are only seven weeks out from a Budget, with the Treasury’s deadline for submissions looming on Wednesday.
Some credit first. The last Budget took two numbers straight from Backing Breakthrough Businesses. The Enterprise Management Incentive (EMI) asset cap went from £30 million to £120 million and the employee limit from 250 to 500. Enterprise Investment Scheme (EIS) and Venture Capital Trust limits doubled, though relief on the latter fell from 30% to 20%. So I’ve delved into our archives to pull out the policies that haven’t yet been implemented.
First, rule out equalising capital gains tax with income tax. As I wrote in May, Entrepreneurs’ Relief went from £1 million to £2 million to £5 million to £10 million, back to £1 million, was rebranded, then ratcheted from 10% to 14% to 18%, the last step landing in April. A 20% charge on unrealised gains at the border was floated last Budget and dropped rather than ruled out. Founders can’t price a 15-year bet against a system that lurches annually. Is it any surprise that our polling revealed that 62% of founders know another founder who left after the 2024 Budget?
Second, restore the Business Asset Disposal Relief lifetime limit to £10 million, where Entrepreneurs’ Relief sat, and tie it to reinvestment. According to our Entrepreneurs Survey, 72% of founders would put the proceeds of a more generous relief into someone else’s startup and 70% would launch another venture. Sweden deferred tax on gains from unlisted shares reinvested in unlisted companies in 2003, left it alone for two decades, and now produces more unicorns per head than almost anywhere.
Third, index the thresholds. Backing Breakthrough Businesses recommended that we uprate the investment and gross asset limits on tax reliefs annually. The EMI limits were set in 2000 and sat frozen until April. Every few years the ecosystem campaigns to drag them back in line with inflation. This should be automatic.
Fourth, fix the plumbing on the venture schemes — three repairs from the All-Party Parliamentary Group for Entrepreneurship’s Funding to Flourish, outstanding three years on. Make SAFE notes eligible for the Seed Enterprise Investment Scheme (SEIS) and EIS rather than voiding relief when they don’t convert within six months. Scrap the 2014 financial health test, which disqualifies any company whose liabilities exceed its assets, or that has spent more than half the capital it raised. And make HM Revenue and Customs (HMRC) ring an applicant with a clarifying question during advance assurance instead of refusing in silence.
Fifth, abolish Stamp Duty Reserve Tax (SDRT). The UK Listing Relief was the right instinct: three years’ exemption for new listings, about £50 million a year, while the 0.5% charge sits on everything else. SDRT taxes the investment and the return on it, including when the return is negative. It doesn’t come cheap — so if not this year, at least set the direction.
Sixth, treat HMRC as growth infrastructure. Making Tax Simple asked for a callback service, on the evidence of a Chartered Institute of Taxation survey in which 94% were dissatisfied with service levels and one in five would give up rather than keep trying to get through. We also suggested surfacing eligible reliefs inside Making Tax Digital software. A relief nobody knows about doesn’t change behaviour, and 74% of the founders we surveyed knew of none they could claim. Take-up would rise and it would cost something, but it would also incentivise the activity those reliefs were set up for.
Seventh, reset procurement rather than layering on it. Building Blocks found single-bid tenders rose fivefold between 2012 and 2018, against procurement worth around 15% of GDP, a tenth of which reaches SMEs. In May I wrote about a British company blocked from G-Cloud for negative EBITDA and a light balance sheet, which is normal for any growth-stage tech company. To its credit, the Government took note and the listing was reinstated. The rule that blocked it is still there.
Eighth, cut the cost of coming and hiring. A founder arriving alone on an Innovator Founder visa pays £6,862, or £18,694 with a partner and two children, with the health surcharge payable up front for the whole visa. June’s reimbursement scheme for scaleups doesn’t cover founders at all. Last year’s Job Creators argued Britain should stop filtering out the people it says it wants. The fees are doing the filtering. More from us on this shortly — sign up for our next Job Creators launch here.
Ninth, regulate sterling stablecoins for growth. A Sterling Opportunity makes the case for principles-based rules on transparency, reserve backing and custody, rather than redemption obligations and holding caps low enough to rule out corporate treasury use. Sterling stablecoins are backed by gilts, and Healey has the highest cost of servicing government debt in decades.
Tenth, close the online marketplace value added tax (VAT) gap. In February we joined 18 other business organisations in calling for a consultation on extending liability rules, where overseas sellers avoid charging VAT and pocket a 20% price advantage. It closed on 18 August and nothing has followed. Reform could recover an estimated £700 million a year.