Treasury has today announced that it will publish a road map for social investment in 2014; and introduce two social investment tax reliefs, for social enterprises and social impact bonds.
In April of next year, the government will introduce a social investment tax relief for social enterprises. The relief will be available for equity and certain debt investment in charities, community interest companies and community benefit societies.
The government will also introduce a tax relief on investment in social impact bonds where the special purpose vehicle is structured as a company limited by shares.
It is expected to announce details on both next week.
Before this, in January 2014, the government will publish a road map for social investment setting out its next steps. These include seeking state aid clearance for a larger tax relief scheme, looking at options for supporting indirect investment and making changes to regulations for community interest companies to make them more attractive to investors and social organisations.
Nick O’Donohoe, chief executive of Big Society Capital, has welcomed the government's move. He said:
“Until now, social investment has been dominated by charitable foundations, the government and Big Society Capital, but these plans could open it up to thousands of individual investors.
“Today’s announcement that the relief will include a range of debt and equity products as well as social impact bonds is positive, as this should provide what many organisations crucially need, as well as accelerate the development of innovative social outcomes-based products.
“We now hope to see the government deliver on its bold ambitions in the detail of the draft legislation next week by setting the rate of relief for investors to be comparable with existing reliefs such as the enterprise investment scheme, and ensuring the relief applies to investment of sufficient size that it will really enable organisations to grow and develop.”
Luke Fletcher, a partner at Bates Wells Braithwaite, also welcomed that the government had opened up the social investment tax relief to social impact bonds, but noted that companies limited by guarantee and co-ops were not included.
"The devil will be in the detail of the draft legislation, which will be published on 10 December. We wait to see, for example, if the scope of eligible investee enterprises might change over time but the direction of travel looks promising," he said.
Jane Tully, head of policy and public affairs at CFG, said she hoped simple unsecured loans will qualify for the relief on investment into social enteprise.
While Dan Corry, chief executive of NPC, also welcomed the news, he cautioned: "We must remember that tax breaks for social investment do nothing for the vast majority of the charitable sector."
