Jenny Tooth comments on the Chancellor’s new multibillion pound package of support for jobs
As we come to terms with yet another phase of lockdown measures across the UK, the Chancellor has made the political choice to scrap the Budget in favour of a winter economy plan, including a multibillion pound package of support. This may be regarded as keeping open a blank cheque with no sign of how we will pay for this next phase of spending. But as further measures are taken to keep people away from work, whilst winding down the furlough scheme to businesses, the new package announced today is focused now in favour of interventions to support return to work and subsidising wages in recognition of the need for at least part-time work for the next six months. This is not a sector-focused scheme, but is a clear shift to focus on supporting viable jobs that are sustainable, rather than keeping jobs alive under furlough, but will not prevent a massive rise in unemployment especially in hardest hit sectors of hospitality and tourism as the main scheme closes, despite keeping VAT down to 5% until March 2021.
However, it is heartening to see that the main business loan support schemes under CBILS and the BBILS Bounce back loans, which many angel-backed businesses have taken up, will now be extended to November and most importantly the loan term extended from 6 to ten years. It’s important to know that the Future Fund, which has been the main measure under Covid for supporting businesses seeking VC funding with nearly £600m to nearly 600 businesses having now taken up the convertible loans, will also be continued during this period, although the issue of incompatibly of the loans with EIS remains to be resolved.
Despite the budget being scrapped and decisions on wealth taxation postponed for the time being, the Chancellor has recently commissioned some major reviews of key areas which are very relevant to the investment market. The first is a review of the working of Capital Gains Tax and existing reliefs which are of course an important component of the EIS and SEIS scheme and we would all consider CGT relief as vital in incentivising individuals to back high risk entrepreneurs. We also need to ensure that Capital Gains is taxed at a lower rate than Income Tax to incentivise entrepreneurship (especially in view of the now massively scaled back Entrepreneurs Relief) and which also acted as an incentive to many cashed out Entrepreneurs to angel invest. Significantly the Chancellor has also commissioned a review of the working of the FCA and the current structures around retail investors and their current protections under FCA, but also looking at the exemptions. This will include a working of FSMA and the carve out to the Angel investment community to enable them to recruit HNW and Sophisticated investors, looking at definitions and whether these give sufficient protection. This is an important area of operation for the informal angel market and provides an opportunity for UKBAA and its members to ensure that the FSMA market framework is maintained and fit for purpose but it will be important to review the interface between the formal and informal Angel market. UKBAA will be making a response to these reviews and encourage you to submit your views.
This remains a challenging time and whilst there will need to be a trade-off between health and the economy, we need to ensure that that we have a fiscal and regulatory environment that is supportive to the growth of the angel and early stage investment market and ensures that the UK is an attractive place for individuals to invest and grow businesses. The continuing availability of an effective supply of risk capital to small businesses across the UK should be core to the Chancellors economic plan going forward and we will be continuing to focus on this in our interactions with Government and in relation to the current Spending Review.