Budget boost to venture capital schemes
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.FRESH MEASURES to boost the provision of venture capital to genuine start-up businesses are due to be unveiled by Gordon Brown in next week's Budget. The Chancellor is expected to announce an enhanced scheme for Venture Capital Trusts (VCTs), but restricted to companies that are genuinely new.
The measures will be part of a Budget with two dominant themes - promoting enterprise and creating a fairer society. Mr Brown sees entrepreneurship as vital to raising productivity.
The Budget will also confirm the creation of a public-private Enterprise Fund, trailed in last year's Competitiveness White Paper. This could either provide direct loans or guarantee loans taken out by start-up firms. There will be measures to boost entrepreneurship, including improved employee share ownership schemes.
Treasury research has shown that UK venture capital is heavily biased towards investing in management buyouts rather than new businesses, unlike the US. The market for small company equity is also far less liquid.
Venture capitalists invested pounds 3.1bn in the UK in 1997, but pounds 2bn went on financial restructuring, according to figures from the British Venture Capital Association. Just pounds 159m was invested in early-stage companies and pounds 58m in start-ups.
Mr Brown is likely to tailor tax breaks towards genuine provision of venture capital. The Budget will adapt the recommendation of the Williams Report on financing hi-tech businesses. Published in November, it suggested offering full marginal tax relief to investors but confined to hi-tech firms.
The Treasury is nervous about defining "hi-tech", and about the charge that it will try to "pick winners". However, the enhanced VCTs could be opened to all brand new businesses seeking to raise funds.
The CBI's small and medium enterprise council has called for extra measures to boost entrepreneurship. It stressed the need to simplify the available tax reliefs and incentives, and criticised the complexity of executive share ownership schemes needed to provide incentives to key managers and employees in new businesses. Share option schemes have played a key role in US start-ups, and Mr Brown is sympathetic to proposals for an improved UK scheme.
The CBI has also called for improvements to the business asset capital gains tax taper, which now requires employees to hold a minimum 5 per cent stake in the company's equity to qualify. Key employees' holdings can be diluted below that level by equity issues, the CBI says, and the limit should be abolished for full-time staff. The 25 per cent minimum for outside investors should fall to 5 per cent, it says.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments