Tax break for social investors is enterprising move

From today, UK investors will have the opportunity to invest their money in a pioneering fund which aims to provide a social, as well as a financial, return on investment. This fund is sponsored and managed by Social Investment Scotland, Scotland’s leading community development finance institution.

As the first social investment tax relief fund available in Scotland, SIS Community Capital allows individuals to invest in a fund which provides tax relief, whilst supporting the growth of social enterprises generating sustainable social and environmental impacts.

The tax relief structure is crucial. Social enterprise has lobbied for parity of tax relief treatment with regular EIS investment. This relief can only increase the attractiveness of social investment to the investor community, which, in turn will open up a new source of capital for Scotland’s growing social enterprise sector.

The benefit for social enterprises is not just an increase in the availability of capital, but more importantly the cost of that capital. Using this funding method enables SIS to offer loans to social enterprises at a cost lower than that secured through other sources.

As for investors, research shows that there is an unmet demand for social investment products. There is an untapped market for investment products which provide a vehicle for investors who want to see their money do some good. However, tax relief is a major consideration for these investors, and through SIS Community Capital, they will be provided tax relief in the form of a 30 per cent relief on their investment from their income tax liability.

With the aim of attracting up to £500,000 investment to support between five and ten social enterprises, SIS Community Capital can blaze a trail for a new form of finance which can help to connect more capital with communities across the country. The success of this pilot fund will open the door to larger initiatives in due course.

• Nick Kuenssberg is chairman of Social Investment Scotland. www.socialinvestmentscotland.com/