Two social impact bonds launched today to help young homeless people will be the first to use the new social investment tax relief.

The two SIBs are worth more than £900,000 and will help just under 500 young homeless people find accommodation, education and employment in East Midlands and Gloucestershire.

£150,000 of that funding will be provided by ten individual investors benefitting from the newly introduced SITR.

Social investment tax relief is a new relief which came into law last year, and allows individual investors to claim back against tax 30 per cent of unsecured investment put into charities, or other legal vehicles with a social benefit. This is the first time that SITR has been used in conjunction with a SIB.

A social impact bond is a type of payment-by-results agreement in which an investor funds a charity to provide a service – in this case working with homeless people – and the government agrees a pay-out, usually much larger than the investment, if the charities’ intervention is successful in meeting pre-agreed targets. If the charity does not deliver the agreed results, the investor loses out.

One of the SIBs is called Ambition East Midlands and covers Derbyshire and Leicestershire. It will be delivered by three local charities – P3, YMCA Derbyshire and The Y. It will support 340 young people and has benefitted from £600,000 of investment, including £100,000 under SITR from five individuals.

The other is called Aspire Gloucestershire and will work with 150 young people. It will be delivered by P3 and CCP and benefited from £310,000 of investment, including £50,000 under SITR from another five individuals.

The SIBs are two of seven agreed through the Fair Chance Fund, which is backed by the Department for Communities and Local Government and the Cabinet Office.

Most of the funding for the SIBs will be provided by specialist social investors Big Issue Invest, CAF Venturesome and the Key Fund, with more provided by individuals and some coming from the charities themselves.

Individual investors will receive 7 per cent per annum returns, in addition to the 30 per cent tax relief, if the SIB delivers the expected results.

The deal was developed with advice and help from social lender Triodos Bank.

Mark Simms, chief executive of P3, said: “With traditional methods of funding disappearing we had to look at new ways to find the finance that we needed to bring the project to life.

"We’re delighted that we can be one of the first and pioneering charities to be issued with social finance, we’re an innovative organisation by nature and social impact bonds suit our unique way of working.”