Changes to tax systems and current regulations could help social investment achieve much more, says Nick Temple at Social Enterprise UK
Since my last column, news or comment on finance and the third sector has been dominated by the proposal to cap tax relief for charitable donors, introduced in the Budget and now scrapped. This set in motion the Give it Back, George campaign, caused "anger and bemusement" at the Giving Summit and potentially affected the finances of hundreds of charities.
What was largely overlooked in this major furore was the cap's extension to community investment tax relief, a 10-year-old social investment scheme that provides 25 per cent tax relief to investors putting their money into intermediaries that fund and invest in social sector organisations.
And what was largely overlooked in this more minor furore was that CITR doesn't work well in its current form, and that all the major recommendations to improve it - from Social Enterprise UK's Social Investment Forum and colleagues at the National Council for Voluntary Organisations - had also been ignored in the Budget.
The donation debate rumbles on, but where next for advocates of social investment? Where should the focus be? After all, only about £70m of investment over 10 years has been raised using CITR, and more than half of that has been by one major social bank. Contrast that with the fact that Big Society Capital is bringing £600m to the table and aims to invest between £40m and £50m in its first year. This gives us more imminent matters to think about: namely the pipeline of charities and social enterprises getting ready to take social investment in all its many forms.
Nevertheless, tax remains a vital issue: changes to tax systems and current regulations could help social investment achieve much more and help more money flow towards third sector organisations. This is where we enter the alphabet soup of tax-incentive schemes.
Suffice to say that, alongside improvements and extensions to CITR, changes to other existing schemes are needed to make them appropriate for investment in social enterprises and other social ventures; these include the Enterprise Investment Scheme (EIS), Venture Capital Trust (VCT) and the Seed Enterprise Investment Scheme (SEIS). This gives us the alphabet soup, but provides little direct benefit to the sector.
I think it sometimes gets interpreted as special pleading when we ask for social enterprise tax breaks, but surely there's no justification for opposing social enterprises accessing benefits that have already been created for mainstream businesses. All we're asking for is a level playing field; after all, those benefits could help third sector organisations raise more money to achieve more social and economic impact, whether that's through donations, social investment schemes or crowdfunding and other retail-side developments.
Which is what it's all about: money is a means to an end and, for our members, the end consists of achieving a social mission and maximising their impact. That makes wading through the alphabet soup, advocating tax changes and helping build the pipeline all worthwhile.
Nick Temple is director of business and enterprise at Social Enterprise UK