By Max Clarke

The Treasury’s consultation document, Tax-advantaged venture capital schemes, examining tax breaks for certain start-up businesses with high growth potential, has been met with scepticism by the Institute of Directors.

Specifically, the Business Angel Seed Investment Scheme (BASIS) which encourages angel investors to invest in incipient businesses, is particularly contentious. Growth, argue the institute, must be promoted across the board by keeping tax rates down for all businesses. A new scheme for seed capital may help some, but it is not the most important thing to do.

If the Government does introduce a new scheme, it must be kept simple, or it will not appeal to investors or companies. The Government should try building on the existing, and widely-understood, Enterprise Investment Scheme (the EIS). It should not introduce complex definitions of qualifying companies, or of business angels. And it should look at creating an especially simple scheme when only ordinary shares, and no other financial instruments, are involved.

“We understand the reasons for the Government’s interest in a special scheme for seed capital,” commented Richard Baron, Head of Taxation at the Institute of Directors. “Some companies don’t get the capital they need in order to get off the ground. But proposals such as this one must not distract the Government from the vital task of promoting growth by reducing burdens on all businesses.”

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