I must add my voice to the chorus of UK entrepreneurs urging the chancellor to rethink his damaging proposal to abolish taper relief on capital gains tax (Innovation must be encouraged).

The government stresses its commitment to boosting entrepreneurship in Britain but withdrawing taper relief would have the opposite effect. From my experience as founder and chief executive of Trampoline Systems, a London-based software business, I can see three ways that the proposed change would seriously damage the UK economy.

First, it will discourage people from setting up new businesses in the UK. One of the primary motivations for entrepreneurs is the capital return when a company is bought by a larger business or floated on a stock market. The prospect of a big prize motivates entrepreneurs to keep going through years of hard work and penury.

Under the chancellor's proposals the government will demand a breathtaking 80 per cent more of entrepreneurs' returns when the pay-off is achieved. We should not be surprised to see a generation of UK entrepreneurs relocating to the US or other European countries where the regime is less draconian.
Second, it will make it harder to recruit and retain talented employees.

It is already difficult to attract skilled personnel, and offering employees an equity holding in the business is crucial. At Trampoline we give employees a share of ownership in the business. The proposed legislation reduces the value of employee stock options, introducing a new obstacle for UK businesses to attract talent.

Third, it will reduce the motivation for investors to make long-term commitments to firms they fund. With taper relief the longer someone holds onto their shares in a company, the less tax they will pay when they eventually sell them. This is good news for businesses such as Trampoline as it focuses everyone on long-term success and brings greater stability.

I fully support the concept of a capital gains tax. It is right that I as an entrepreneur should share the fruits of my success with the wider society. What is at stake is a question of balance. The chancellor's proposals are ill-conceived and would seriously hurt the UK economy.

Charles Armstrong