Social enterprises could receive a boost in 2014, after the government laid out its plans to extend tax relief benefits to social enterprises in a bid to increase investment.
The Social Investment Roadmap builds on a formal consultation on social investment tax relief, which was published in summer 2013. The government will now apply to the European commission for permission to increase the size of the approaching tax relief for social investment.
David Gauke, secretary to the Treasury, commented, “The government wants to make the UK one of the easiest places to invest in social enterprises in the world.
“We’re setting out the steps we plan to take over the year which will further enhance the environment for social enterprises in the UK, creating the right conditions to allow the sector to thrive.”
The plans aim to expand the options for indirect investment in the sector, establish a government-run accreditation scheme for social impact bonds eligible for the tax relief, make changes to community interest companies’ regulations and promote the scheme to both social enterprises and investors.
From April 6, investors can receive an income tax reduction by investing in enterprise that trade for a social good or purpose. Big Society Capital predicts that the incentive could unlock up to £500m of extra investment over the next five years.
Nick O’Donohoe, the chief executive of Big Society Capital, said, “It is encouraging to see the government formally consulting on increasing the options for indirect investment, as this would make it easier for social investment fund managers and new investors to use the relief.
“It is welcome news that the government recognises the challenges for social sector organisations in understanding the new relief, and we hope that the guidance and awareness raising that they have announced will help to address this.”
The tax relief will apply to investments in charities, community interest companies and community benefit societies. It will also apply to social impact bonds where the special purpose vehicles is a company limited by shares. The rate and the maximum amount of investment eligible per organisation will be announced at the budget on March 19.