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Autumn statement: financial advisers talk social investment tax relief



The government should introduce a tax relief for social impact investments in order to widen the sector’s attraction to the retail market, specialist ethical financial advisers have said ahead of the autumn statement.

A period of consultation on a possible tax relief was closed in July. It set out to create incentives for investors who were looking to put their money in social enterprises and other socially-focused investment products.

Big Society Capital tell us that tax reliefs could generate an extra half a billion pounds in social investments over the next five years”, David Cameron said in a speech in June. “And I am determined that we should see the benefits of that.”

Speaking ahead of the autumn statement on Thursday, Julian Parrott, a partner and financial adviser at Ethical Futures in Edinburgh, said, “I feel that the time has come to create wider participation from retail investors in the growing social impact investing space.

The growth in this sector sits very well with the government’s ‘big society’ agenda but is currently the preserve of charities, foundations and high net-worth philanthropists.

Tax relief would give the market the impetus to create retail products, such as enterprise investment scheme (EIS) and venture capital trusts (VCT) which might be attractive to the smaller investor and help to grow the market through wider market participation.”

However, there are a number of regulatory obstacles to overcome before a social investment tax relief becomes viable, according to Mark Hoskin, a partner at London-based Holden & Partners.  He said that while it “may be good PR for government”, the likelihood of such a product reaching the adviser community was slim given current regulations.

A key point to be made to the Financial Conduct Authority (FCA) would be that the motivation behind investors would not be totally financial. These types of investments lie between charity and investment”, Hoskin said.

He went on to suggest that the Treasury could place a cap of around £2,000 on contributions. This could reduce the consumer risk. He added, “At this level the FCA would allow the product to be marketed to retail investors without the need for specific advice.”

In addition to a carefully thought out social investment tax relief, Hoskin said he wanted to hear George Osborne deliver benefits to individual savings account (ISA) investors in the autumn statement.

He added, “I hope we hear about some extensions to the allowable investments within ISAs and no further tinkering to personal pensions, which is damaging the savings culture and encouraging more people to simply buy residential property, making residential property less and less accessible to the have-nots.”

The Telegraph reported on Tuesday that returns from crowdfunding products were set to be included in ISA investments.

Further reading:

Third sector urged to up its game to capitalise on new social investment measures

Social investment tax rules must not exclude social enterprises, says SEUK

‘Research council’ formed by industry leaders to deepen social investment market

Autumn statement: sustainable investment industry calls on Osborne to back renewables

Autumn statement: green NGOs reveal their wishlist


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