Government urged to 'seize the day and back entrepreneurs' by opening up incentives for 'the bank of mum and dad' & letting ISAs back small firms

Helping entrepreneurs access finance through stocks and shares ISAs, letting parents back their children's businesses using investment tax breaks and replacing business rates with a commercial land tax are among the recommendations in a new report aimed at promoting business growth.

To make it easier for entrepreneurs to access equity funding, the APPG for Entrepreneurship called for reforms to make it easier for the so-called 'Bank of Mum and Dad' to invest in their children's businesses instead of property.

It argued that the 'Connected Person' rule for the Enterprise Investment Scheme (EIS) should be amended to allow parents to benefit from the tax relief through the EIS and Seed EIS.

The government should also allow stocks and shares ISAs to invest in unlisted companies to encourage greater investment in high growth small businesses.

As part of the report, written by Sam Dumitriu, policy Advisor at The Entrepreneurs Network, 500 business owners were surveyed and 40% complained that Britain's much criticised business rates were harmful to the success of their company.

The report called for rates to be replaced with a commercial land tax to cut costs and incentivise property improvements.

Business rates often entail incorrect and complicated valuations, the study said, which place a large burden on businesses if they have to appeal a misvaluation.

As it stands, if a commercial property owner owns a business park then each individual occupier will have to separately make tax payments. By shifting the legal incidence to commercial property-owners the business park's owner would instead file a single claim. Likewise, if there were issues with the business park's valuation, then the owner would be able to file a single appeal, rather than multiple business owners being forced to make separate appeals.

In addition, investments in property improvements are discouraged as they increase the property's rateable value and the subsequent tax bill. Under a commercial land tax, firms would no longer be penalised for carrying out improvements.

The study found awareness of existing tax schemes is low. A third of business owners hadn't heard of either the Employment Allowance or the Patent Box and only one relief, R&D Tax Credit, had over 80% awareness.

The APPG said the government should increase awareness of such support schemes by promoting them in letters and emails sent by HMRC to business owners.

Colin Clark MP, Conservative MP for Aberdeen and officer of the APPG for Entrepreneurship, said: "The Treasury and HMRC must play their part in ensuring policy has longevity and is not open to gaming.

"In my 28 years' experience in business, nothing is more sobering than an HMRC investigation. Instead of imposing flashy policies, the Treasury must applaud those willing to take risks. Let's seize the day and back our entrepreneurs."

Sam Dumitriu, policy adviser at The Entrepreneurs Network, added: "If we are to succeed outside the European Union then it's vital we become the best place in the world to start and grow a business.

"Simplifying the tax system and improving incentives to invest will boost entrepreneurship, raise wages, and create jobs."

Enterprise Nation's Show me the money! campaign offers content and events to help you better understand the finance options open to your business and to meet organisations with the funds.

A free event take place in Edinburgh on 21 November.

Show me the money! is supported by:

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