The UK Treasury is considering introducing a new tax relief for entrepreneurs who reinvest the proceeds from selling a successful business into another venture.
The proposed Repeat Entrepreneur Relief, backed by business groups including Founders Forum Group, UK Private Capital and the Startup Coalition, would allow founders to defer Capital Gains Tax (CGT) if they reinvest their profits into UK startups, scale-ups or growth funds.
The proposal comes ahead of the Autumn Budget, with supporters arguing that the measure would encourage more experienced entrepreneurs to start new businesses and keep investment within the UK.
Research commissioned by Founders Forum Group and conducted by Beauhurst Insights found that only one in eight UK founders who sell a business go on to build another. The research estimates that around 10,200 founders have sold a company but have not returned to build another.
The report also found that businesses started by experienced founders raise 61% more capital and are typically 25% larger by headcount than comparable companies started by first-time entrepreneurs.
Under the proposed scheme, founders would be able to defer CGT on gains from a business sale if they reinvest the proceeds into qualifying UK businesses or growth investment vehicles. The proposal includes a £250,000 cap on qualifying reinvestment, in line with the lifetime funding limit under the Seed Enterprise Investment Scheme (SEIS).
The relief would defer the tax liability rather than remove it altogether, allowing founders to put more of their capital into a new venture before paying tax on their original gains.
Founders Forum Group estimates that the scheme would cost the Treasury around £22,500 per reinvesting founder, while each additional business created as a result could generate an estimated £740,000 in employment taxes over ten years.
The group’s modelling suggests the relief could pay for itself if it persuaded fewer than one in 200 founders who would not otherwise have done so to reinvest in another business.
Carolyn Dawson OBE, CEO of Founders Forum Group, said: “We know the founders who often build Britain’s strongest companies are those who’ve done it before. Repeat Entrepreneur Relief helps them do it again, here.
“Keeping capital in the UK, supporting the next cohort of successful British businesses makes this one of the simplest decisions for the Treasury to make in this Budget”.
The proposal is part of a wider package of measures put forward by Founders Forum Group to support UK startups and scale-ups. Other recommendations include expanding the Enterprise Management Incentive (EMI) share-option scheme, introducing a Digital Adoption Tax Credit and creating an investor route to the Global Talent visa.
The Treasury has not confirmed whether the proposed relief will be introduced. Any decision on tax measures is expected to be announced at a fiscal event.
