UK private equity industry applauds Brown

UK private equity practitioners have welcomed relevant proposals made by Gordon Brown, the UK Chancellor of the Exchequer, as part of his pre-budget statement yesterday.

In his statement, the Chancellor proposed increased benefits for research and development, capital gains tax cuts, VAT simplification and an expansion of the share options scheme for employees.

SJ Berwin, the European law firm, said that little of what Brown had said was genuinely new, but nonetheless welcomed the initiatives aimed at benefiting the venture capital community.

In a comment issued today, SJ Berwin said: “The fact that from next April there will be an exemption for gains on sales by trading companies of substantial shareholdings in other trading companies might unlock buyout opportunities. And the extension of the Enterprise Management Incentive Scheme to companies with gross assets of up to £30m can only be welcomed.”

John Mackie, CEO of the BVCA said that Brown’s proposals would give “welcome assistance in what is a difficult economic environment” for venture capitalists to operate in, adding that the apparent resilience of UK economic growth was good news for the private equity industry.

While Berwin saw as positive the news that from next April the effective rate of capital gains tax on business assets will be ten per cent after two years instead of four, Mackie said Brown’s plans relating to the tax did not go far enough. “I regret that he didn’t abolish capital gains tax altogether”, Mackie said, allowing that “these changes are heading in the right direction.”

SJ Berwin urged that the Chancellor should take “very seriously” criticism that he is meddling with the UK’s tax system, making it more complicated in the process. “The charge that the Chancellor is meddling, whilst failing to grasp the nettle of more fundamental reform and simplification, is one which he should be taking very seriously indeed.”