Charlie Elphicke, Conservative MP for Dover and Deal, cited the Quoted Companies Alliance in the second reading of the Finance Bill on 11 October 2010. QCA CEO Tim Ward had met with him earlier that day and highlighted the our that the Enteprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) should be widened by altering the employee limits.
He also mentioned our views on capital gains tax, the inclusion of AIM shares into ISAs, and the abolition of Stamp Duty, which are all outlined in the QCA's response to HM Treasury's and BIS's consultation on Financing a Private Sector Recovery.
Please see the excerpt from the debate below or click here to read the full debate on the second reading of the finance bill:
Mary Macleod (Brentford and Isleworth) (Con): Does my hon. Friend agree that a reduction in corporation tax is a way to encourage more small businesses and to keep big business in the United Kingdom, and that it will help the overall long-term growth of our economy?
Charlie Elphicke: Absolutely, yes. The previous Government were planning to increase corporation tax on smaller businesses and to do nothing for larger businesses. The reduction in corporation tax that we are seeing across the board is an incredibly positive move by the coalition Government that will help to create more jobs and money and help to encourage businesses-international businesses in particular-to set up in the UK.
We need more liquidity for smaller businesses, but we also need tax reform for smaller businesses. Earlier today, I met the Quoted Companies Alliance, which represents smaller quoted companies. It put to me the suggestion that we should perhaps think harder about the enterprise investment scheme and venture capital trust regimes. They are limited at about 50 employees, but EU state aid approval would be allowable for fewer than 250 employees under the EU SME definition. I hope that Ministers will consider that in due course and in further Finance Bills. There is a negative effect on businesses because they dare not grow over 50 employees. That is quite important.
The QCA says that the connected company or connected person regime should be considered, because business angels could be effective and useful directors and advisers to those businesses. The alliance also says that it would be better to have lighter touch regulation. It would concede the income tax relief if it would help to keep the capital gains tax relief and increase the limits and thresholds available in the EIS and VCT regimes. I hope that Ministers will consider that and will consider the technical detail that will help to improve things for the smaller business sector.
On CGT, the alliance welcomes the entrepreneurs' relief-it says that that is great-but asks why it lasts for only 12 months. Does that not encourage speculators? Should it not be for three or four years, to encourage long-term investment? Should it be restricted just to those who have 5% and are employees or should it perhaps involve those who have 5% or who are employees, to widen the investment base for smaller businesses that benefit from entrepreneurs' relief? I hope that Ministers will also consider reinvestment relief when entrepreneurs come up with wonderful ideas, sell their businesses and reinvest. Perhaps they should be encouraged to do so with a wider base of reinvestment relief, to lock in more capital and investment, which will create more jobs and money over the longer term. I recognise that these are ideas to be developed in further Finance Bills, but I hope that Ministers and the Government will give them due consideration as time passes.
The other question the alliance raises is why we do not allow AIM shares to be put into individual savings accounts. That seems to make little sense. The AIM market has changed massively since the late '90s and it would perhaps be constructive to allow AIM company shares to be in ISAs so as to widen the investment pool and widen the availability of capital to businesses that are typically smaller in nature and faster growing.
Finally, although the London stock exchange has said for a long time that we should have got rid of the stamp duty reserve tax, which is difficult to afford in the current circumstances, the QCA asks the interesting question: what would happen if we allowed getting rid of SDRT outside the FTSE 350 for smaller companies, to help to make their shares more liquid? Trading volumes would be lower and it might be more affordable. I hope that that is something to which Ministers will give due consideration and thought in future Finance Bills.
The most important thing for our country and our countrymen is to have more jobs and more money. I hope that over time we will develop a further growth agenda and deepen the one that we have already put forward, so that we can have faster structural trend growth and the UK can become the envy of not just our friends in the European Union but the world as a whole.
