Investments in mid-size businesses need tax break, says report

Individual long-term investors in mid-sized businesses need to be encouraged by more tax incentives, according to a new report from the Confederation of British Industry & BDO.

The report, jointly authored by BDO and the CBI says that additional tax incentives would enable more of the country's medium-sized businesses to achieve their full potential.

Figures

Medium-sized businesses represent around 1.8% of all UK companies according to the CBI. They also employ an estimated 16% of the total work force.

John Gilligan, BDO partner said: "Making the most of the UK mid-market is fundamental to creating a balanced and sustainable UK economy. But the UK lacks diversity in long-term funding sources – particularly for mid-sized companies."

"We're not trying to reinvent the wheel. Instead we're suggesting an innovative adaptation of existing distribution channels. This is designed to allow new entrants to start up and flourish alongside current funding sources," he explained.

Ideas

Among the report's recommendations are 'long-term lending trusts', which would be tax vehicles offering relief on savers' income generated by investments into medium-sized business debt funding.

By targeting individual savers, benefits would be offered yield not capital gain and income tax relief.

Although the change could cost the government about £310m, the CBI and BDO argue in the report it could “unlock billions of new long-term loans" and would also be likely to provide "relatively high returns, whilst offering a strong degree of protection".

John Cridland, CBI director-general said: "Incentivising savers to invest in our businesses for the long run is a win-win. It offers them attractive, alternative investment packages, while helping propel medium-sized businesses along their growth path, boosting the economy as a whole and enhancing productivity."