Incentivise savers to boost investment

Posted on 26 Aug 2015 by Fred Tongue

Those who provide long-term investment to medium-sized businesses should receive tax breaks and incentives according to new report.

The report has recommended ways the Government can increase equity investment in the ‘forgotten army’ of Britain’s medium-sized business (MSB) that make up 1.8% of all the companies in the UK, account for 16% of total employment, and generate close to a quarter of private sector revenue.

The Confederation of British Industry (CBI) and accountancy firm, BDO have suggested a system called Long Term Lending Trusts (LTLT) which offer income tax relief to savers who invest in long-term MSB funding.

The jointly published report also recommends changing the way the Enterprise Finance Guarantee works by rewarding lenders who provide longer term loans.

John Cridland, director general, CBI.
John Cridland, director general, CBI.

CBI Director-General, John Cridland commented: “Building up a British ‘mittelstand’ of successful medium-sized businesses is mission critical to our economic future.

“With little recognition, these firms quietly toil away, creating jobs in communities and boosting growth in every corner of the nation.

“A key part of unlocking their enormous potential is for the Government to fix the funding ladder, filling in the gaps in supply of long-term finance that the UK’s brightest growing firms need to succeed.

“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.”

In order to qualify for the LTLT tax incentives investors must commit to providing long-term debt for at least five years and should offer individual savers a return based on yield, not capital gain and a deduction from income tax in the year of investment.

The LTLT would cost the Government £310m a year but the report suggests that there would be relatively high returns and offer a strong degree of protection as well as unlocking new long-term loans that could unlock billions for MSBs.