By Press Release
Jesus encouraged the well-off to open their hands to the poor. He said they should rejoice in the blessings they receive from God and, in turn, give aid to those who do not enjoy the same material benefits. Quite why he chooses to bless so few isn’t adequately explained.
I’m a huge fan of The Jam and, in his early days, Paul Weller encouraged us to ‘share the wealth’ too. He joined Billy Bragg as a member of Red Wedge for a while, the group of musicians who wanted to oust Margaret Thatcher in 1987. But when the time came, he privately educated his six children. Having been a firebrand youth, Weller had second thoughts when it came to spending his own money after he’d made some. Wealthy socialists usually blame the Tories for perceived failures of public services, so it could be that he opted to pay eye-watering school fees because he believed the wicked Tories ruined state education.
Tax is big news this week and, having parted with huge amounts paying it, like you I have strong opinions on the subject. In 2001, after selling a business I had built up from scratch, I paid the taxman a truly eye-watering sum and I’ve often handed over six-figure sums in the years since. If you believe that means I could easily afford to have paid even more, then let me explain why I think you’re wrong.
When I sold up, knowing how much I would get to keep was an important part of the decision-making process. If the taxman had wanted too much, I wouldn’t have sold, and the exchequer would get nothing; the rate charged needed to be fair. After paying my bills, I had to decide what to do next, and I chose property development. We set out to build around 30 new houses, and that requires massive investment. Whatever you hear, buying land and committing to long-term projects is risky; my accountant advised me against it. Regardless, like all businesspeople, I stuck my neck out (again) and spent every last penny I had and more, even arranging a million-pound overdraft. First, we built a new road and bought a £60,000 electricity substation, just that with other infrastructure costs was well over £200,000 upfront. Next, we built six houses, with a sale price of £180,000, hoping each would give us an eventual £40,000 profit.
At this point things unravelled, despite open days and marketing, none of the houses sold, no one wanted them. The builder asked to start on the next six, and reluctantly, we agreed. If we hadn’t said yes, he would have walked, and we might never have got him back again. Of the 30 homes we wanted to build, to meet affordable home targets, seven had to be sold to a housing association, for exactly half their market value. This was far less than the build and infrastructure cost; effectively it’s just another tax. At this point, you might think ‘Yeah, but you were making a fortune, you could afford it’. I remind you; I had spent every penny I had, borrowed huge sums and was paying monthly interest with no guarantee of a profit. The future looked bleak; I seemed destined for failure. Would my gamble ever pay off?
Happily, the market changed, selling prices rose sharply and our houses sold. This was pure luck, and the eventual profit was remarkable, so the taxman did well too. Had the tax rate been higher, I might not have bothered investing my money at all and 30 families could still be without a home. Whatever anyone says, for entrepreneurs, tax rates definitely matter.
