OFFERING ADDITIONAL TAX INCENTIVES to savers who commit to providing long-term finance would boost the country’s medium-sized businesses as they seek to reach their full potential, according to report jointly authored by BDO and the Confederation of British Industry.
Stepping up: fixing the funding ladder for MSBs outlines proposals to stimulate long-term debt and equity investment in Britain’s medium-sized companies. Among those recommendations are ‘long-term lending trusts’ – vehicles offering income tax relief to savers who put their money into medium-sized business debt funding.
According to the CBI, medium-sized businesses represent about 1.8% of UK companies and employ some 16% of the country’s workforce.
Targeting individual savers would offer a return based on yield, not capital gain and income tax relief, with a deduction from income tax in the year of investment. The move would cost the government about £310m, but the authors argue it “could unlock billions of new long-term loans” and would likely provide “relatively high returns, while offering a strong degree of protection”.
BDO partner John Gilligan 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.”
CBI director-general John Cridland (pictured) added: “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.”
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