Government urged to offer tax breaks to SME investors

The BVCA, which represents the venture capital and private equity industries, said in its submission ahead of this year’s budget that the government could consider reviving the Corporate Venturing Scheme, which was scrapped in 2010.

It also called for reforms to entrepreneurs’ relief, specifically scrapping the 5 per cent threshold, the employment test and the £10m lifetime limit, “to send a clear message to entrepreneurs that if they make a success of their business in the UK, they deserve to keep the proceeds for them and their team.”

The BVCA’s submission said: “The debate at present encourages us to choose between one aspect or another of our political economy – SMEs or large businesses, bank debt or equity finance, infrastructure investment or exporting. But actually we must look at all of these in the round.

“We want SMEs to become large businesses and we want large businesses to invest in small ones to foster innovation. A healthy mix of equity and debt is more important than prioritising one over the other.”

The report follows calls by the CBI and London mayor Boris Johnson for small businesses to consider using more equity finance, rather than relying on bank debt for funding.

The BVCA report added: “It is worth highlighting that 90% of businesses that private equity and venture capital invest in are SMEs. As with every single private equity investment our goal is the same, to help them grow. These SMEs are therefore the ones with high growth potential – the ones that can create the jobs the UK economy needs.”

It also called for the lifting of visa restrictions on non-EU migrants with a degree in STEM subjects and the introduction of a tax credit for apprentices.

BVCA director general Simon hames said: “By improving the flow of financing, getting more multinationals to use corporate venture capital and by incentivising employers to take on apprentices, the UK can ensure this recovery is a sustainable one.

“Britain needs to see more of its SMEs become national and global players, and given that 90% of UK private equity and venture capital goes to such enterprises, we have a very important role to play in securing Britain’s economic success.”

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