Budget 2014: Rate of social investment tax relief to be 30 per cent

Budget 2014: Rate of social investment tax relief to be 30 per cent

Budget 2014: Rate of social investment tax relief to be 30 per cent2

Finance | Vibeka Mair | 19 Mar 2014

The Chancellor of the Exchequer has today announced that the new social investment tax relief will be set at a 30 per cent rate, and will be worth £35m a year to social investors by 2018/19.

The relief will offer an income tax rebate to those making unsecured investments in asset-locked bodies – charities, community interest companies and community benefit societies – and in social impact bonds.

Big Society Capital, the social lender wholesaler, had called for the government to set the level of relief an investor can reclaim at 30 per cent, equivalent to that available to investments under an existing scheme, the enterprise investment scheme, for investors buying shares in small, profit-making businesses.

SITR will be available from 6 April, for organisations with a maximum number of 500 staff. Organisations will be able to receive up to £290,000 over three years under the scheme.

The 30 per cent rate is higher than the 25 per cent for 40 per cent rate taxpayers reclaiming when they donate to charity and lower than 31.25 per cent for 45 per cent rate payers using gift aid.

Sector reaction

Matt Mead at Nesta Impact Investments welcomed the relief and highlighted that its scope will be widened shortly. “By setting the tax relief for social investment at 30 per cent this starts to level the playing field and makes investing in charities and social enterprises as attractive as investing in small private companies.

“While it’s a shame that this will initially only apply to quite small  levels of investment and be restricted to certain types of organisations the government are clearly committed to changing this over the next 18 months.”

The government is currently applying to the EU for state aid approval in order to allow the relief to apply to larger amounts.

Commenting on this a Social Finance spokesman said: “We hope that this larger scheme will also reflect the rules of the commercial schemes and enable eligible investees to raise up to £5m over any rolling 12 months.”

The Social Economy Alliance, a coalition of social enterprises and trading charities, also welcomed the tax relief, but warned it would need promotion.

Social Economy Alliance spokesperson and chief executive of the Social Investment Business Jonathan Jenkins said: “This will be a missed opportunity if it’s not fully promoted by government, who should work with the sector to market and promote the tax relief, so more businesses and investors can improve their social impact. This relies on the collaboration of the whole financial advisory community.”

Big Society Capital to help create products to use tax relief

Big Society Capital has today announced that it will produce “how to” guides for investors in April; work with providers to drive the creation of products which will use the tax relief; and work with legal experts to create generic investment  documentation to help investors save on costs.
Nick O’Donohoe, chief executive of Big Society Capital, said:“The introduction of venture capital tax reliefs in the UK 20 years ago led to individuals investing £14bn into small growing businesses. But finance is changing. Now is the time for investors to seize this opportunity to invest for social good and benefit from tax relief that is equivalent to existing schemes.”

NPC had a more measured reaction to the news. Iona Joy, head of charities at NPC, said:  “Players have been lobbying for tax incentives to get the market going for some time—it will be interesting to see if this unlocks the potential they hope for.

“However, before we celebrate too wildly, there will be devils in the detail that I hope officials can get right. What will constitute social investment? As a taxpayer, I don’t want to fund a commercial enterprise masquerading as something it isn’t just to get a tax break. Will qualification be dependent on the type of corporate vehicle? Or demonstrable achievement of social good? The former will be easy to administer, the latter much harder to demonstrate. The degree of social benefit varies massively between different investments.”

Copia Wealth & Tax
31 Mar 2014

In theory this is a great idea... in practice I'm unsure - so few will be affected by this in a positive way it just feels like a wasted effort.


21 Mar 2014

The relief will offer an income tax rebate to those making unsecured investments in asset-locked bodies...

Withdrawable share capital is at least partly repaid if a community benefit society winds up. So withdrawable share capital is not qualifying?


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