BVCA calls for return of taper relief

John Bakie
13 February 2013

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The BVCA has called for the return of the controversial taper relief for capital gains tax (CGT) in some cases.

Today, the BVCA published its latest policy recommendations for the UK government, which includes calls for greater training to improve youth employment prospects and a more targeted industrial policy to help Britain compete globally.

Among the recommendations is a call to return taper relief, the controversial tax break which was abolished by the previous Labour government in 2008.

Under the pre-2008 CGT regime, assets that were held for longer than two years were taxed at just 10% to encourage longer term investment, while those held for short periods would face a 40% tax, to prevent short-term speculative trades.

However, the rule caused a major storm in the UK media, with the oft mentioned claim that private equity fund managers were paying a lower rate of tax than their office cleaners. Labour set a flat rate of CGT at 18%, while current chancellor of the exchequer George Osborne increased this to 28% for higher earners.

The BVCA says taper relief should be returned for investments in SMEs to encourage more long-term, patient capital for this sector of the market. The suggestion is likely to be seen as less contentious than a full return of tax relief as it would be focused on smaller companies that are struggling to raise capital from more traditional sources.

Other recommendations include putting promoting innovation and growth at the centre of the new Financial Conduct Authority's guiding principles and giving pension funds tax credits on dividends in return for supporting venture capital funds.

The BVCA also wants more to be done to enhance British industry globally, including greater investment in development of the UK-discovered super material graphene and increased support for university spinouts through tax incentives. Additionally, it wants infrastructure and energy projects to be underwritten and guaranteed by governments over long, multi-parliament periods to reduce risk and encourage more investment.

Robert Easton, BVCA chairman and managing director of The Carlyle Group, said, "There is now qualified support for a targeted industrial policy, with real energy and enthusiasm for supporting key sectors where the UK has a comparative advantage.

"However, the feedback we received was that we are still spreading our resources too thinly in an effort to give something to everyone – we need to concentrate our effort to build critical mass."