The Institute of Directors (IoD) has warned the Government that a rise in capital gains tax (CGT) would affect Britain’s entrepreneurial spirit.

If the Government decides to act on recommendations from a recent report by the Office for Tax Simplification, capital gains tax rates could be increased to help cover the costs of the COVID-19 pandemic.

Writing for the Daily Telegraph, IoD chief economist Tej Parikh said this approach would be “flawed”, and would discourage people from starting businesses or taking on risk.

With the Brexit transition period approaching, Parikh also argued that hiking CGT right now could add to the “impression held by some that wealth creation is falling down our list of priorities”, and urged the Government to consider the UK’s international reputation as a destination for business.

Parikh added:

“Any reform would have to be done with extreme care to prevent a knock-on effect. Positive entrepreneurialism will be more important than ever in the months ahead.

“All told, ramping up CGT will pour cold water over Britain’s entrepreneurialism just when we need it most. It’s not an answer to the costs of coronavirus, but rather paves the way for a stunted recovery.”

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