General Election 2015: What are the parties saying about private equity and venture capital?

As the election campaign reaches its climax, we highlight those policies of the major UK-wide political parties which are likely to impact the private equity and venture capital industry.

Conservatives

“We will eliminate the deficit in a sensible and balanced way” Conservative Party 2015 manifesto

The Conservatives have committed to £30 billion of fiscal consolidation over the next two years. That will be made up of £13 billion of departmental savings, £12 billion of welfare savings and raising at least £5 billion from “tackling tax evasion and aggressive tax avoidance and tax planning”. One of the announced policies on how that £5 billion will be found is to raise the annual tax charge on non-doms. Other tax policies in the manifesto include:

• No increases in VAT, National Insurance contributions or Income Tax
• Increasing the tax-free Personal Allowance to £12,500 and the 40p Income Tax threshold to £50,000

Access to bank lending is also addressed: policies include extending the Bank of England’s Funding for Lending scheme, supporting new and existing challenger banks through the British Business Bank, improving support for start-ups and rolling out the Help To Grow scheme.

The most controversial infrastructure policy is a manifesto commitment to halt the building of onshore wind farms and extending right to buy to housing association tenants. And in terms of long-term outlook there is of course the promise of an in-out referendum on EU membership by the end of 2017 – probably the biggest single issue for business in the next Parliament.

Labour

“Labour’s plan to balance the books means making tough, but fairer choices” Labour Party 2015 manifesto

Much has been made of the Labour Party’s Ten Point Plan to cut tax avoidance and evasion by at least £7.5 billion a year in the next Parliament. The plan includes these policies of interest to private equity:

• Abolition of the non-dom status
• A review of carried interest rules in situations where individuals place only a nominal or minimal amount of their own money in a fund
• Scrapping the “Shares for Rights” scheme, under which managers are allotted tax advantageous “employee shareholder shares”
• Forcing UK Overseas Territories and Crown Dependencies (such as the Cayman Islands and British Virgin Islands) to produce publicly available registries of beneficial ownership, following in the footsteps of the PSC register which is already law in the UK (read our articles on the PSC register here).

Other tax policies in the manifesto include:

• Re-introducing a 50p top rate of Income Tax and lower 10p starting rate but otherwise not increasing the basic or higher rates of Income Tax, National Insurance or VAT
• A tax on properties worth over £2 million

Labour has also addressed access to bank lending by promising to establish a new British Investment Bank, building on the Business Bank, to provide growth finance and support a network of regional banks with a core purpose to support small business growth in their area.

Liberal Democrats

“We will borrow less than Labour and cut less than Tories” Liberal Democrat 2015 manifesto

The Lib Dems say they have identified a series of “distortions, loopholes and excess reliefs” that should be removed, raising money to contribute to deficit reduction. These include reforms to Capital Gains Tax and Dividend Tax relief and refocusing Entrepreneurs’ Relief, though they have not yet announced any specific policies on these areas. Other tax policies in the manifesto include:

• No increases in VAT, National Insurance contributions or Income Tax
• Increasing the tax-free Personal Allowance to £12,500
• A High Value Property Levy on residential properties worth over £2 million
• Restricting access to non-domiciled status, increasing the charges paid to adopt this status and ending the ability to inherit it.

In terms of access to finance, the Lib Dems say they would expand the British Business Bank to perform a more central role in the economy, tackling the shortage of equity capital for growing firms and providing long-term capital for medium-sized businesses.