HC Deb 10 March 1981 vol 1000 cc781-2

My second new proposal breaks entirely fresh ground.

One of the biggest problems faced by people thinking of starting their own business is the difficulty of attracting sufficient risk capital to finance it during its critical early years. The amounts of additional money needed can be modest—at least as compared with the sums in which the big financial institutions commonly deal. But in individual cases they can be crucial.

The individual private investor has for many years had little encouragement to help fill that gap in the capital market. I propose to change that. The private investor can often contribute not only risk capital but direct personal business experience. The opportunities are certainly there. What is needed is to make it more attractive and more rewarding for private investors to take advantage of them.

I am, therefore, introducing an entirely new tax incentive to attract individual investors to back new enterprises. It is designed for the outside or minority investor in certain new small trading companies, as distinct from the owner of the business, his close family and associates. I am calling it the business start-up scheme. Under the scheme an investor will be able to obtain relief against income tax on up to £10,000 invested in any one year. The relief will be given in addition to the range of tax reliefs already available to the company itself, provided the investment is maintained for at least five years.

The scheme will relate only to genuine new business enterprises of the kind I have in mind. There will be strict rules to ensure that it is not used for investment in financial or passive operations, or for tax avoidance.

I am introducing the new scheme in the first instance for a three-year period, beginning with the coming financial year 1981–82.

This business start-up scheme will be unique in not only this country but among our main trading competitors. It will be a striking new incentive to channel investment into small businesses.