‘Settling Up’ tax risks driving UK tech founders overseas
Speculation continues over whether a future ‘settling up’ charge could be introduced for business owners who leave the UK, and rightly concerns are growing about the potential impact on entrepreneurship, investment and the UK’s attractiveness as a destination for high-growth businesses. Against the backdrop of the government’s ambitions to strengthen Britain’s technology sector and accelerate regional innovation, the prospect of an additional tax on business owners leaving the UK raises fresh questions about the country’s long-term competitiveness.
Matt Hodgson, partner at Claritas, comments: “Andy Burnham isn’t yet ruling out a ‘settling up’ charge, a tax on business owners who leave the UK, and that will have sent alarm signals to tech company founders, many of whom will feel forced to consider planning their exit while they still can. The more unpredictable danger is the effect on the future of the UK’s £1.7tn tech industry and its Northern base, which the government has just put £1.7bn behind to scaling tech clusters across the region. There are already a whole host of tax rules covering corporate ‘exit charges’ from the UK, our stringent ‘statutory residence tests’ for individuals, plus some very onerous anti-avoidance measures called ‘Transfer of Assets Abroad’, so an additional tax on individuals leaving the country makes Britain an even riskier place to start a business in the first place, and will just lead to new founders taking their ideas elsewhere, many of who sadly already are!”
The growing concern that any additional tax on entrepreneurs will cause them to leave the UK could have unintended consequences for business confidence, attracting international talent and inward investment and the country’s ability to attract and retain innovative companies. At a time when the government is seeking to cement the UK’s position as a global technology powerhouse, measures perceived as increasing uncertainty for founders’ risks undermining that ambition.