Small businesses are missing out on vital investment and management expertise due to larger companies ignoring corporate venturing, a new report has claimed.
Corporate Venturing UK (CVUK) said that although large firms are offered tax breaks to help develop startups, many feel that the process is still not attractive enough to invest in.
CVUK said that although motivations behind corporate venturing are usually not purely financial, the lack of genuinely enticing tax incentives through the Corporate Venturing Scheme (CVS) meant that many small firms were losing out.
According to CVUK, only “a handful” of small businesses have benefiting from investment under the CVS since its introduction in 2000.
In a submission to the government as part of a consultation on venturing, CVUK pointed out that investors only get up to 20 per cent corporation tax relief on the amount invested.
CVUK said that this threshold should be raised to 30 per cent, in line with mainstream corporation tax.
The venturing firm also said that small businesses should benefit more, with the government contributing towards them when initial investments are made.
Nick Cox, director of CVUK, said that a real opportunity was being missed.
“We are seeing a definite rise in interest in corporate venturing, but for most companies, the tax breaks offered by the Corporate Venturing Scheme have very little impact.
“Changes need to be made to make the scheme more suited to the needs of business so that it does, in fact, serve to stimulate activity and build on this growing demand.
“Offering small firms as well as corporate investors benefits under CVS would give a much needed boost, as it could help them bridge the equity gap.
“It would provide them with another selling point to attract investors, who would take comfort that the capital they invest will go further, giving them more ‘bang for their buck’,” he said.
