A former adviser to the government on SMEs has warned there could be a mass exodus of talent out of the UK if Chancellor Rishi Sunak hits businesses with tax hikes in this week’s Budget.
Mr Sunak is widely tipped to be considering an increase in Corporation Tax and Capital Gains Tax in a move that would hit entrepreneurs hard.
Personal income tax bands and the £50,000 higher rate threshold could be frozen for three years pushing 1.6 million people into a higher bracket by the time of the next General Election. National Insurance for the 4.5 million self-employed could also rise.
Richard Alvin, Group Director of London-based Capital Business Media and an advocate for SMEs, said he feared many entrepreneurs could be driven out, enticed by less harsh tax regimes in Europe or elsewhere.
Mr Alvin, who has interests in media, electric vehicles and angel investing said: “If the Chancellor believes increasing the tax burden on businesses and entrepreneurs is what the country needs right now, he is very much mistaken.
“Increasing taxes will turn the heads of entrepreneurs towards other places just at the time we need them at their most creative.
“Many entrepreneurs will leave UK shores and this brain drain will increase the hole in the UK’s finances, damaging our prospects for a quick bounce back recovery.”
Mr Alvin called on the Chancellor to put his trust in entrepreneurs, not scare them away.
And he revealed how he had recently moved his holding company to the Channel Islands where a Jersey base would see his personal tax rate reduce to 20% and his company would pay no Corporation Tax.
Mr Alvin estimated the move would see a combined saving in excess of £200,000 based on the sums paid during 2020.
“This is not about personal gain,” he said. “Like many entrepreneurs the savings won’t be spent on lavish cars or holidays, when holidays are allowed of course.
“These savings have already been re-invested into the company with the creation of a new business awards division which will see HMRC receive VAT in excess of £100,000 per annum.
“We will also create at least four new full-time roles with salaries over £30,000 each. This in turn will provide around £20,000 to the Exchequer in terms of tax and National Insurance payments.
“This is the mindset that entrepreneurs have, and which is often misunderstood by politicians,” said Mr Alvin.
“Ministers need to put their trust in entrepreneurs to create the wealth that will pay down the massive debt run up during the Coronavirus crisis.
“Making life more difficult for entrepreneurs and taking away the incentive to create, build and re-invest is counter-productive.
“Now is the time we need our entrepreneurs at their best and my plea to the Chancellor is to let them get on with it. Let’s grow our way out of this. Let’s not choke off the recovery before it’s even begun.”