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Think tank urges the treasury to scrap tax relief in favour of funding the NHS


By Beth Gault
Freelance journalist
29 August 2018

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The Chancellor should scrap billions of pounds in tax relief for entrepreneurs and instead use the money to fund the NHS, a think tank has urged.

The Resolution Foundation, which aims to improve the standard of living for low and middle income citizens, has called tax relief for entrepreneurs the UK’s ‘worst tax break’, as it is ‘expensive, ineffective and regressive’. Instead, it has called for the money to be spent on delivering the promise of extra funding for the NHS.

In analysis published today (29 August), the organisation said the Government could generate £2.7bn in savings per year by scrapping the tax. It said this could be a ‘head start’ in funding the Government’s pledge to finance an extra £20bn for the NHS per year by 2023-24, made by Prime Minister Theresa May in June.

The Resolution Foundation has called on the Treasury to reconsider the tax in the autumn budget, which will be announced in November.

The tax relief was initally announced in 2008 and allows people selling companies to pay half the normal rate of capital gains tax in an effort to encourage entrepreneurship. However, the Resolution Foundation said the tax had ‘ballooned’ to ten times the cost it was initially meant to be.

The think tank said those that benefited from the tax break have mostly been wealthy individuals, with 6,000 people who made claims on gains over £1m, accounting for 69% of the gains.

Adam Corlett, senior economic analyst at the Resolution Foundation, said: ‘The UK’s £2.7bn entrepreneur’s relief is hugely expensive and overwhelmingly benefits a small number of wealthy individuals. There has also been no serious evaluation of the relief, despite it costing £22bn over the past decade.’

‘As the treasury wrestles with how to raise revenues to fund the Prime Minister’s pledge of £20bn for the NHS, they should start by scrapping this expensive, regressive and ineffective tax relief.’

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