The Treasury has dismissed the idea of launching a 'Patient Capital ISA' - an initiative that had been backed by fund manager Neil Woodford.
Woodford (pictured), who runs the £829.5m Patient Capital investment trust, had said earlier this year there was evidence to suggest many mass-affluent investors would invest in early-stage businesses over the long term if they had the appropriate incentives to do so.
At the time, a spokesperson for Woodford Investment Management said the creation of a new tax wrapper could offer structural tax incentives that would encourage the flow of private savings towards institutional investors, and then on to young businesses that need it.
However, today's consultation paper from HM Treasury, Financing growth in innovative firms, said a patient capital ISA would be too difficult to define.
The Treasury also said it was "unclear" whether the product would have "sufficient impact" within the existing ISA regime to justify going ahead with the launch.
The paper said: "It would be difficult to define these funds in legislation so that investment was both targeted at those firms most in need of patient capital and compliant with the state aid obligations that continue to apply.
"Without being able to define the scope of a new product effectively, the investment criteria for a new relief would be broad and may therefore not support new investment effectively.
"In addition, given ISA investors can already invest up to £20,000 per year into these types of assets, it is unclear that this option would have a sufficient impact to justify the complexity it would add to the wider ISA regime. The government is therefore not minded to pursue this option."
As an alternative option, the Treasury suggested having more listed funds investing in patient capital available to investors.
"The review's current view is that focusing new resources on increasing investment via a fund may be more effective and provide better value for money than spreading resources to include changes to the tax environment," it said.
"As such, the review is currently minded not to recommend the introduction of a new tax incentive to support greater retail investment in listed patient capital funds."
The Treasury said it was seeking responses to the consultation paper by 22 September. Email responses should be sent to: [email protected] and written responses to: Financing Growth in Innovative Firms HM Treasury (2 Orange) 1 Horse Guards Road London SW1A 2HQ.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation