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Scrapping capital gains tax relief would cause many entrepreneurs in the UK to re-think starting their own business, a new study suggests.

The Entrepreneurs' Organisation (EO) London asked its members - many of whom are established and successful businesspeople - if they would be put off from starting up again should the tax (also known as taper relief) be abolished.

Most of the respondents said this would put them off, with a third saying they would think about emigrating immediately.

Taper relief works by giving businesses a discount on the capital gains tax they pay on business assets, with the amount saved depending on how long the asset has been held.

However, there are murmurs that Gordon Brown could face pressure to do away with the relief as some critics believe that private equity firms are exploiting it.

EO London's William Berry says: 'Removing entrepreneur-rewarding mechanisms like taper relief may result in an exodus of talent, reducing investment in UK business, and having a considerable negative impact on the British economy.'

Meanwhile the Forum of Private Business (FPB) has called on the government to ease the tax burden on small firms in the UK.

A new FPB poll shows that cutting tax and red tape are the two areas where most small businesses think the Treasury's efforts should be concentrated.

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