Brown urged to give pounds 1bn boost to entrepreneurs

BUSINESS LEADERS will next week call on the Government to match its words with action by agreeing to a pounds 1bn package of measures designed to foster more high-growth entrepreneurial companies.

In a submission to Gordon Brown, the British Chambers of Commerce will urge the Chancellor to use his March Budget to introduce a range of fiscal incentives targeted at small firms, particularly those in the hi-tech sector.

The centre-piece of the programme would be an "entrepreneurs' investment incentive" entitling all start-up businesses to claim tax credits on their investments for the first three years.

The BCC will also call for more favourable tax treatment of share options, savings and capital allowances and the resumption of tax allowances for profit-related pay, but on a more tightly defined basis.

Its Budget submission is expected to recommend that small firms be allowed to offset 100 per cent of capital investment against tax each year up to a limit of pounds 250,000 - a move that would cost the Treasury some pounds 600m.

The BCC, which represents 110,000 companies across manufacturing, services and retail, is also expected to float the idea of launching a business equivalent of the Individual Savings Account.

Called the Business Investment Savings Account or BISA, it would allow small businesses to put up to pounds 250,000 of profits into a tax-exempt fund each year to finance future expansion. There would be no time limit on how long the money was left there but the tax relief would only be available if the funds were reinvested. The scheme would cost the Exchequer around pounds 250m a year.

Other measures which are likely to feature in the submission are a reduction in capital gains tax to 20 per cent for all taxpayers and an increase in the threshold at which small companies start paying corporation tax from pounds 300,000 to pounds 500,000.

Another recommendation is that small high-growth firms be allowed to grant employees share options up to a value of pounds 250,000 without any income tax liability. At present the limit is pounds 30,000 but the BCC believes this is too low to enable such businesses to attract the kind of managerial talent they need.

In his pre-Budget report last November, the Chancellor pledged to introduce measures to support enterprise and innovation.

He also offered to consult with small businesses on the possibility of new tax credits set against research and development spending.

Since then, the Department of Trade and Industry has published a competitiveness White Paper outlining a range of initiatives aimed at entrepreneurs, such as a pounds 150m Enterprise Fund. But this only contains pounds 20m of new money and many of the other schemes are either uncosted or will be financed by switching resources from other parts of the DTI budget.

Other measures supported by the BCC include tax breaks to encourage large companies to train suppliers and road pricing at local level, provided all the money raised is reinvested in transport schemes.