Proposals in the Autumn Statement designed to help benefit the charity and not-for-profit sector, including new incentives to invest in social enterprises, have received a positive response as a way of increasing the funding available to the sector.
The Chancellor unveiled a tax relief for equity and certain debt investments in social enterprises with effect from April 2014. Organisations which are charities, community interest companies or community benefit societies will be eligible, and the government said that following consultation, investment in social impact bonds issued by companies limited by shares will also be included. The government will publish a roadmap for social investment in January 2014.
Graham Batty, chairman of the CIOT's charity taxes working group, welcomed the news, saying the inclusion of debt investments is particularly helpful as many social enterprises do not have a share capital and so would otherwise not be able to use the scheme to attract funding.
'However, as the detail of the relief has yet to be announced we are cautious as to whether in reality this will be attractive to and workable for both social enterprises and potential investors. We await the publication of the draft legislation with interest,' Batty said.
Nick Sladden, Baker Tilly's head of charities and social enterprises, said: 'A new tax relief on investment in social impact bonds is also welcome, as it will provide greater incentive to invest in schemes that will deliver a social benefit as well as a financial return. We await further specific details on the proposals, but we would anticipate a rapid expansion in the take-up of this investment class over the next few years as the social impact bond market grows.'
Marianne Fallon, KPMG's head of corporate affairs, described the proposals, which are the first to be made available to social enterprises, as 'a welcome shot in the arm'. She said social enterprises were key to the Chancellor's stated ambition of removing any 'cap on aspiration', by enabling individuals and communities to unlock their potential.
John Cooney, EY's head of private client services agreed, but said: 'The administrative process must be sufficiently simple and inexpensive to capture the interest of the smaller investor. In addition the amount that business can raise under this measure must be set at a meaningful level, in order to make it attractive.'
The Autumn Statement also confirmed plans to introduce anti-avoidance legislation to prevent a charity from being entitled to claim charity tax reliefs if one of the main purposes of establishing the charity is tax avoidance, in the wake of the Cup Trust case.
The government is to establish a new working group to revise the model Gift Aid Declaration to make it easier to understand, and to develop new promotional material to increase take-up. It also intends to allow intermediaries to take a greater role in operating Gift Aid in order to reduce the number of instances where a new Gift Aid Declaration is given, but is to consult on how this can be done before changing legislation.
Corporate Gift Aid will be extended to include qualifying donations of cash by companies to Community Amateur Sports Clubs (CASCs). The law is to be changed to make it clear that partial relief from stamp duty land tax (SDLT) is available where a charity purchases property jointly with a non-charity, following a recent Court of Appeal decision on this issue. The government will also amend legislation underpinning the Cultural Gifts Scheme to ensure that estate duty is brought into charge where appropriate.
