Defusing the fiscal bomb

Andrew Jupp, national head of tax at accountancy firm Tenon, argues that the UK’s growing businesses need more help from the government. James Harris reports


Andrew Jupp, national head of tax at accountancy firm Tenon, argues that the UK’s growing businesses need more help from the government. James Harris reports

Andrew Jupp, national head of tax at accountancy firm Tenon, argues that the UK’s growing businesses need more help from the government. James Harris reports

If entrepreneurs are going to save the UK economy, then they’re going to need better tax breaks, claims Andrew Jupp, national head of tax at accountancy firm Tenon.

Jupp argues that the financial environment for early-stage businesses is now ‘hugely uncompetitive’ compared with the UK’s trading partners around the world: ‘Five or six years ago, I would have said that the system was very helpful to businesses, but the landscape has completely changed and considering we have the same government that brought in all the incentives, it seems a complete about turn.’

One of the most painful measures has been the withdrawal of taper relief in 2008. In its place came entrepreneur’s relief, but that only provides a tax reduction for the first £1 million made on a business. ‘That’s peanuts for a successful company,’ says Jupp.  

Moreover, the small companies rate of corporation tax has gone up to 21 per cent and is predicted to rise to 22 per cent. There also hasn’t been any significant changes to venture capital trusts and investment schemes to encourage more investment. Says Jupp: ‘The final nail in the coffin is the increase in the higher rate of income tax to 50 per cent, which has driven wealth creation out of the UK, therefore reducing the amount of tax in-take and producing a brain-drain as people leave the country.’

It leaves a bleak outlook: ‘It seems to me that the entrepreneurial sector is not at the forefront of the government’s thinking in terms of where UK Plc ought to be going.’

Bold choices

The UK’s public debt, which is now 55 per cent of GDP, doesn’t leave much room for change, but Jupp insists there are options to help growing businesses. He points out that Ireland has a corporation tax of 12.5 per cent: ‘Ireland is going to struggle to come out of the recession, as are we all, but the difference is that the Irish fiscal authorities want to make up the deficit by encouraging investment, while the UK is saying, naively: “Lets just increase the tax rate.”’

Another big problem with the tax changes is that it hits early-stage businesses especially hard: ‘Big Plcs have the resources to do a lot to minimise taxes. While a large corporate might be able to go off-shore, a regular UK business with a turnover of £10 million and 50-100 staff simply can’t do all that much.’

It is safe to say that Jupp has a long wish-list for the government. In addition to reversing many of the measures he mentions above, such as corporation tax and tax relief for entrepreneurial businesses, Jupp ‘would also like to see a relaxation of some of the red tape in claiming research & development tax credits, as well as a reversion to the 40 per cent income tax rate’.

It’s imperative that business and investment is encouraged, rather than stifled. Says Jupp: ‘I think entrepreneurial businesses should be leading us out of the recession; they are the lifeblood of the UK economy. It is those businesses that will drive growth.’

Nick Britton

Lexus Ernser

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...