Financing growth in innovative firms – part of HMT’s Patient Capital Review

At Autumn Statement 2016, Philip Hammond MP announced the government’s commitment to provide more support for UK infrastructure and innovation, as part of the government’s Patient Capital Review. The review, led by a panel of industry experts chaired by Sir Damon Buffini, will consider the factors affecting the supply of patient capital (defined as “long term investment in innovative firms led by ambitious entrepreneurs who want to build large-scale businesses”).

As part of this review HMT has now published a consultation document financing growth in innovative firms which looks at the availability of long term finance and the barriers faced by companies seeking to access patient capital.

ICAEW’s response to this consultation is being led by the Corporate Finance Faculty with input from other parts of the business. The Tax Faculty is particularly interested in chapter six of the consultation document which considers the current tax reliefs available for investors providing capital. We will be providing comments to the following questions which can be found on page 50 of the consultation document:

  1. Which programmes (investment programmes, tax reliefs and tax-incentivised investment schemes) have most effectively supported the investment of patient capital to date?

 

  1. Are there areas where the cost effectiveness of current tax reliefs could be improved, for example reducing lower risk ‘capital preservation’ investments in the venture capital scheme?

 

  1. Are there other ways the venture capital schemes could support investment in patient capital, in the context of state aid restrictions and evidence on cost effectiveness?

 

  1. When is it more appropriate for government to support patient capital through investment rather than through a tax relief?

 

  1. Is there an optimum minimum length of time of investment for entrepreneurs and investors to focus on the long term growth of their company and, if so, what is it?

 

  1. What other steps could government take to make current tax reliefs more efficient and effective, to provide the best support in line with their policy objectives? 

Responses to the consultation will inform decisions around resource allocation which will be announced in the autumn Budget.

Please send any comments to Sarah Ghaffari sarah.ghaffari@icaew.com by 8 September 2017.

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