UK Treasury To Offer Tax Credits To Boost Deprived Areas

by Jason Gorringe, Tax-News.com

11 July 2001

Consultation by the UK Treasury on plans to give tax credits to investors in deprived areas has convinced the Government to extend the scheme to private individuals as well as businesses.

As originally trailed in last November's 'Pre-Budget' report, the scheme would have applied to companies which invested in start-ups and small businesses in a range of poorer areas across the UK, giving a tax credit against corporation tax on investment returns of 25% for five years. Now individuals will also be allowed to participate, and will receive the tax credit against income tax. The scheme will also be opened to banks, and will apply to debt as well as to equity investment, which, the Government hopes, should encourage banks to participate in the riskier types of venture which they notoriously avoid.

The scheme was originally proposed by a taskforce led by Sir Ronald Cohen, chairman of venture capital group Apax Partners, which was asked to look at the root causes of the lack of investment in disadvantaged parts of the economy. The task force report warned that some of these areas were locked into a spiral of declining economic activity, and were becoming "no-go areas" for investment. Sir Ronald called for urgent action to kick-start economic growth in poor areas by stimulating business start-ups.

The revised scheme will be announced today by Paul Boateng, Financial Secretary to the Treasury, at a conference in Birmingham, says the Financial Times.

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