Social venture capital trust scheme 'gives smaller investors a chance', government says

As a result of yesterday's Budget, individuals making social investments through this scheme will get 30 per cent tax relief

Treasury: George Osborne announced Budget yesterday
Treasury: George Osborne announced Budget yesterday

A new social venture capital trust scheme announced yesterday in the Budget should increase participation in social investment among people who commit smaller amounts, according to the government.

In the Autumn Statement of December last year, Chancellor George Osborne announced that the government would create the new social VCT scheme based on the existing VCT scheme for individuals – known as retail investors.

This will give individuals who make such investments an income tax relief of 30 per cent of the value of the investment. This is already available to people who make larger investments through the social investment tax relief scheme, which came into force in April last year.

A Cabinet Office document published yesterday says the social VCT should "increase participation in social investment among retail investors who want to invest smaller amounts than are generally needed for direct investment and benefit a variety of organisations".

The new vehicle will mirror the existing venture capital trust schemes for non-social investments, and investors will not pay tax on dividends received from a social VCT, the document says.

It is not made clear when the social VCT will launch, but the document says government "will legislate for social VCTs in a future Finance Bill". This suggests it will not be ready for the Finance Bill 2015, which is expected to be published next week.

Simon Rowell, strategy and market development director at the social investment wholesaler Big Society Capital, said: "Establishing robust social venture capital trusts will help to introduce many new people to social investment and significantly increase the funding available to charities and social enterprises. We look forward to working with the venture capital community and government to help get this legislation working."

Encouraging retail investors to become involved in social investment was the major recommendation of a report by Triodos Bank that was presented to the G8’s Social Impact Investment Taskforce in November. Rob Wilson, the Minister for Civil Society, has said it would feature in the Conservative manifesto for the forthcoming general election.

Yesterday’s Budget also announced changes to the way that funds qualifying for social investment tax relief are classified, which means they can be advertised directly to the public from 13 April.

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