In his ten years as Chancellor, Gordon Brown introduced many initiatives to encourage entrepreneurship, or expanded on existing programmes.

He genuinely did some quite useful stuff - until his last budget, and now the Pre-Budget Report by his successor, which seem to be unravelling all those good steps, and sticking two fingers up to entrepreneurs.

Big corporations seem to have done pretty well out of these changes - but entrepreneurs who do the most to create jobs and create value for the economy seem to be losing out - and having more obstacles or financial pressures put in their way.

There are two key changes that I believe will hurt entrepreneurship in the UK:

  1. The Small Companies' Rate of Corporation Tax is going up from 19% to 22% - yet the rate that large corporates pay is going down from 30% to 28%! This follows the last budget when the lower rate of 10% was scrapped too - meaning that the change in taxation on small firms has been quite substantial.
  2. Taper relief on Capital Gains Tax is to be abolished, and a standard rate of 18% will be created. This previously meant that entrepreneurs who built a business from nothing over the course of many years were rewarded with lower tax of 10% - while a large corporate who bought an asset such as a building or another business and then sold it on quickly at a profit without adding any real value paid the full rate of 30%.

    So entrepreneurs will now pay 18% instead of 10%, but corporate raiders and quick-buck traders will now pay a much lower rate of 18% instead of 30% - so what is the government trying to reward?

    But the worst impact is going to be on the ability of risky start-up or early stage companies to attract equity investment from business angels. These investors have been attracted by the idea that any gains they make on the company will be taxed at a lower rate as long as they invest for the long-term. I have seen this incentive help to attract investment to many companies, and it is a great concern that without incentives to make riskier investments, investors will simply choose to stick with bonds or the main stock market.

Of course, real entrepreneurs won't decide to abandon their dream of starting a venture simply because of a few taxation changes, they generally ignore what government is up to and just get on with business - but when there has been so much rhetoric about entrepreneurship in past budgets it seemed that its value to the UK economy was being recognised - but now it seems that corporate business is the flavour of the month and entrepreneurs are out in the cold again.