A welcome tax incentive: now the hard work starts

The incentive could be another part of the jigsaw that helps get appropriate finance to organisations that need it to continue their work, writes Nick Temple

Nick Temple
Nick Temple

Since my last column, the Chancellor, George Osborne, announced in the Budget a consultation on a tax incentive to encourage investment in social enterprises. The charity and social enterprise sectors had been asking for this for some time, and there has been much hard work behind the scenes to get to this stage by civil servants and organisations including our own Social Investment Forum, the National Council for Voluntary Organisations and Big Society Capital.

As I wrote in Third Sector last June, this has been about asking for a level playing field, not for special favours on tax. Most social enterprises and charities cannot access tax relief schemes that are open to mainstream private businesses; this new relief might go some way towards addressing that imbalance.

Wide consultation

Of course, as with the passing of the Social Value Act into law earlier this year, the announcement is just the start of the real work - making it mean something in practice on the front line. To do that, it's hugely important that the consultation reaches out as widely as possible across the sector and incorporates its views along with those of the social investment community.

There are some key questions to consider about the incentive. What would the eligible investee organisations be? What type of investment should it apply to? What type of relief should it be? Who should the investors be: the man on the street, high net worth individuals or foundations? We are asking our members their opinions on these four questions and would welcome thoughts from the wider sector. We know there is a wide diversity of experience and need for finance, and that diversity needs to be represented in the work from here on in. Otherwise we might end up not with the reaction "what a relief", but instead lots of sighs - not of relief - about what might have been.

Maintaining focus

Anyway, enough of bad tax relief puns. We know this incentive won't cure all ills. Some forms of social investment are suitable for some, some are suitable for others, and for many it is not suitable at all. But the incentive could be another part of the jigsaw that helps get appropriate finance to organisations that need it to continue their work. That must remain the focus throughout this process: getting the right sort of money to those who need it to do more good.

In the long term, it might be that the most important aspect of this news is that social enterprise is on the Treasury's radar. Alongside an improving relationship with the Department for Business, Innovation and Skills, this suggests that the economic contribution of the sector is becoming increasingly recognised, which is crucial in this economic climate.

The social purpose is always primary, but these are enterprises that create jobs, training opportunities and local economic resilience, often in the most deprived areas of the country. If that isn't an incentive for investment, then nothing will be.

Nick Temple is director of business and enterprise at Social Enterprise UK

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