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UK family business policy recommendations issued ahead of next year’s election

A list of 12 policy recommendations to support British family businesses has been published by a national sector organisation, ahead of the country’s elections next year.

Notable family businesses in the UK include construction machinery manufacturer JCB, famed for its yellow diggers, and Associated British Food, which is controlled by the Weston family and owns discount retailer Primark.

On a smaller scale, existing finance secretary George Osborne hails from a family business background, with his father and uncle having founded upmarket fabric and wallpaper retailer Osborne & Little.

Released by the Institute for Family Business, the document is the UK’s first family business manifesto.

It focuses on securing finance and investment for family businesses, policies that support sustainable, long-term businesses, and government initiatives that would build skills over future generations.

Currently, the government has no formal definition for family businesses and they are often lumped in with SMEs, despite many family businesses making upwards of £500 million in annual revenues.

Pentland Group, for example, which was awarded the top honour at this year’s CampdenFB European Families in Business Awards, had revenues of €2.2 billion last year.

IFB director general Mark Hastings says: “There are 3 million family firms in the UK, covering all industry sectors, regions and sizes. The success or failure of these businesses affects the whole economy and the 9.4 million people who are employed by them.”

Hasting adds: “As parties of all sides of the political spectrum look at ways to rebalance the economy, the family business sector can provide strong examples of how to build responsible businesses with a long term outlook.”

Next year’s election is due to take place on 7 May. 

The Family Business Manifesto’s recommendations:

  • Removing a “connected persons test” for the Enterprise Investment Scheme (EIS), which encourages investment in startups. According to the IFB, 13% of British family businesses are spin offs from existing family firms.
  • Increasing the Capital Allowances limit. This tax allowance assists family firms buying office equipment and furniture, as well as tools and machinery, but the IFB argues it should be increased.
  • Extending the EIS to mid-sized companies. The IFB says it should help family businesses with up to 500 employees. The existing scheme only caters to firms with up to 250 employees.
  • Changing the rules for the Capital Gains Tax entrepreneurs relief. This currently only applies to entrepreneurs that work in their company, but the IFB argues this should be extended to family investors as well.
  • Increase financing options for family firms. Families need increased competition in the finance market, the IFB says, especially options that match their long-term outlook and don’t require sharing equity.
  • Equalising the tax treatment of equity and debt financing. Families pour profits back into their businesses rather than loading themselves with debt, says the IFB, and shouldn’t be penalised for this.
  • Supporting generational transfer. In the UK there is an existing tax relief for the transfer of business, either during someone’s lifetime or as part of their estate. If this relief was abandoned, the tax implications would mean that many family businesses would have to sell, go into liquidation or indebt the company.
  • Streamlining test critieria for family business tax relief. The IFB argues there should be a single test for family businesses applying for Business Property Relief, as well as the Business Asset Roll-over Relief, which suspends capital gains tax when a business owner plans to replace an asset being disposed with another one.
  • Competitive tax environment. Unlike other firms, the IFB points out, family businesses do not have the choice to relocate their headquarters overseas. Instead the UK government should be seeking tax rates competitive with other parts of the European Union.
  • Apprenticeships. The manifesto argues these are essential to ensure family businesses have the skilled workforce they need to grow and thrive.
  • Introducing an HR tax credit. The IFB says this would mean an investment in people, and allow family firms to train and develop staff.
  • Reduce employment regulation. The document says 82.5% of family businesses believe there is too much in regulation in the UK.
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