Plans from the Treasury may bring in better tax efficiency for crowd-funding services that raise money for small businesses. If all goes to plan, come April these platforms will be in a much better position to help UK SMEs.
Discussions have begun to with the crowd-funding industry to allow people to hold investments from these platforms within tax-free individual savings accounts. If an agreement can be made before March’s Budget it means investments from crowd-funding could be permissible ISA holdings from the start of the tax year in April.
This would be good news for both small businesses looking for lending and the for the crowd-funding service providers themselves. They believe ISA status would force up demand from investors and bolster the industry.
The savers who earn from this platform will also see the benefit as income and gains are taxable at this time. A decision in favour for the ISA status would essentially give crowd-funding official recognition, which would be incredibly news for a service that is relatively new and very innovative.
In terms of Government plans to continue to support small businesses, this could be seen as a step forward and the utilisation of new ways of funding. With the banking system still struggling to lend to small businesses, these plans strengthen an alternative lifeline. There is also the suggestion that the approval of these plans will work as a message to the banks that they need to rethink their willingness to lend.