Stage Three Review – Final Report

Core recommendation 4.1

New or amended insolvency solution(s) for self-employed people / small businesses should be developed with the following features:

• An ability for businesses to continue trading when they are fundamentally still viable
• Flexible debt repayments
• Debt write off (where appropriate)
• Continued access to credit

Scottish Government should work with small business owners, debt advice agencies, insolvency practitioners, Business Gateway, Scottish Enterprise, accountants, business bank account providers and other interested parties in its design and implementation.

Core recommendation 4.2

Enhanced provision for small business debt advice should be put in place. In the short term, additional funding should be provided to expert providers by the Scottish Government to enable this, mindful of the findings of our research with self-employed people. In the medium to long term, the existing debt advice levy should be utilised for funding additional provision, particularly if our recommendation on broadening the contributors to the levy is delivered.

Rationale

Self-employed people are not consistently and adequately served by the existing solutions but are a growing cohort needing support. The existing business Debt Arrangement Scheme (DAS) product, which was established to support small business owners, has not been effective.

Small business, and self-employment is vital for economic activity, employment and innovation in Scotland. The regime can and should promote an environment which enables enterprise. Currently limited viable debt solutions for those running small businesses can be a significant limiting factor in enabling small businesses and individuals who own small businesses to thrive, with a material knock-on to society and the economy.

Capacity for debt advice for small business owners, particularly for those with relatively low income and assets, is not sufficient to meet demand.