The government should scrap stamp duty says the Association of Investment Companies, warning that it makes London’s stock market less attractive to both companies and investors.
With the Budget set to take place next month, the AIC said “decisive action” is needed to unlock growth.
Richard Stone, chief executive of the Association of Investment Companies, said: “Stamp duty is a tax on people investing in the UK. It makes London’s stock market less attractive to both companies and investors. Scrapping it would bring in more private capital, benefitting the economy and the UK’s public finances – and sending a strong message that the country is open for business.”
The AIC has also called for the government to do more to support growing companies by restoring venture capital trust tax relief to former levels. It said the decision to cut VCT tax relief from 30% to 20% in the last Budget made the scheme less attractive.
Stone continued: “We need to make sure we are supporting our most ambitious companies. Venture capital trusts play a vital role in helping companies scale up while remaining in the UK, contributing to the domestic economy. The cut to VCT tax relief made the scheme less attractive and will result in lower funding for the companies with the highest potential.”
Stone said the UK needs more investment if it is to deliver the Chancellor’s key ambitions for greater productivity and economic growth.
He explained: “With stretched public finances the Budget should focus on using government resources to ‘crowd in’ private capital to support policy priorities such as defence, key infrastructure and regional development.
“The investment company structure is perfect for long-term strategic investment, because holdings don’t have to be sold for investors to exit. Investment companies can attract retail and institutional investment alongside government finance.”
According to Stone, the government should consider using the British Business Bank or National Wealth Fund to seed fund new investment companies with specific mandates focused on its policy priorities.
He added: “Growth will be accelerated by the creation of an investment culture in the UK – turning the country from a nation of savers to a nation of investors. Our proposals support that ambition and they must not be undermined by other measures which tax or disincentivise wealth creation.”
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