Our Founder & CEO, Shalini Khemka and Cavendish Corporate Finance LLP Senior Partner, Lord Leigh co-authored a letter which has been signed by 150+ UK leading entrepreneurs and sent to the Chancellor urging him to reconsider scrapping the Entrepreneurs’ Relief.
Entrepreneurs’ relief was set up with the intention of encouraging people to start businesses – this means you’ll pay tax at 10% on all gains on qualifying assets. But Sunak is set to scrap it on the grounds that it disproportionately helps richer people in the south of England.
Lord Leigh of Hurley mentions some of the benefits of Entrepreneurs’ Relief below:
The benefits of the EMI scheme as a key part of the Entrepreneurs’ Relief scheme, whereby entrepreneur business owners with fewer than 250 employees and £30m in assets can use EMI to offer their employees share options i.e. to buy stock tomorrow at what it is worth today and all shares acquired under EMI automatically qualify for Entrepreneurs’ Relief. This enables Start-ups and early-stage businesses to compete and attract the highly skilled talent they need and who might otherwise seek higher salaries at leading Corporates and tech giants. It enables investee businesses backed by angels to not only build their teams at a lower cost but enables employees, founders and investors to be aligned since all have the same stake in long-term success. It also deals with the fact that the firm’s value is heavily dependent on the continued employment of key people. Because of Entrepreneurs’ Relief, start-up employees in the UK pay less tax (10%) on the exercise of stock options and this acts as a powerful incentive to draw innovators to the UK. If Entrepreneurs’ Relief was abolished, the effective tax rate on stock options would double. Thus EMI is a relatively cost-effective way to incentivise high-growth entrepreneurship compared to across the board tax cuts.