The 2013 Budget brought some interesting new developments for social enterprises and social investors. The Government has announced plans to increase tax relief and other investment incentives for private investors looking to invest in the charitable sector. According to the 2013 red book, the Government will begin consultations this summer to discuss details of tax relief for social enterprise investment to be incorporated into the Finance Bill in 2014. The tax breaks and other investment incentives would provide welcome relief to charitable organisations that have been hit hard in recent years by the aggregated effects of reduced income and increased demand for social services.
Many leaders in the social enterprise sector are excited about this announcement. Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said in a statement, “Social investment is an increasingly important way for charities to grow. We’ve long argued that levelling the tax playing field to ensure that social investments are just as attractive as other investments is a crucial part of supporting this burgeoning market. This consultation is a very welcome step and we look forward to contributing.”
A recent report from Big Society Capital (BSC) and the City of London predicts that an extension of tax reliefs for venture capital and philanthropy to also include social enterprise could raise £480 million of new investment over five years. Nick O’Donohoe, the CEO of BSC, said, “By a simple change, which would give social investments a similar tax treatment to that which venture capital enjoys, the Government can stimulate a significant amount of extra investment that will help social enterprises across the UK.”
In addition to the tax relief proposals, the Government also committed to other investment incentives. These include a streamlining of gift aid claims, which are usually given in small amounts using digital mediums, and a £2,000 Employment Allowance that includes charities. The latter policy could have a major impact on charities according to Charity Finance Group CEO Caron Bradshaw. “This could make a difference of £45m to up to 35,000 charities. With most charities being small employers, this will make a tangible and real difference, allowing charities to direct more to their cause, at a time when costs are rising across the board”
Of course all of the social investment policies in Budget 2013 are just proposals that will require future action by the Government. But for now, the response is largely positive across the social enterprise sector, and there is real potential for significant growth in social investment in the coming years.