Investors will handed tax relief from next April if they invest in social enterprises or social impact bonds. The measure was announced by George Osborne in his Autumn Statement on Thursday and it is hoped the move will encourage people to invest £500m in charities and social enterprises in the next five years.
Nick O'Donohoe, chief executive of Big Society Capital – which manages cash in dormant savings accounts on behalf of the Government – said: "The social investment tax relief could be transformative for the UK.
"Until now, social investment has been dominated by charitable foundations, the Government and Big Society Capital, but these plans could open it up to thousands of individual investors."
The relief – the first of its kind in Europe – will be available when you invest in equities and bonds linked to charities, community-interest companies and community- benefit societies.
Marianne Fallon, head of corporate affairs at the accountants KPMG, said: "This is a welcome shot in the arm for social enterprises. Unlike businesses and charities, they have not had their own tax-relief scheme.
"By attracting more investment, social enterprises will be able to extend the reach and impact of their work."
More details of other options to encourage individual investors to back social enterprises will be published next month by the Government in the form of a "road map" for social investment.
It will consider options such as seeking state-aid clearance for a larger tax-relief scheme, supporting indirect investment and making changes to the regulations for community-interest companies to make them more attractive to investors.
"We hope the Government sets the rate of relief to be comparable with existing reliefs such as the Enterprise Investment Scheme," said Mr O'Donohoe.
"It is crucial that it meets the needs of charities and social enterprises, while encouraging individual investors to use their money for social investment."
Threadneedle Investments has just launched a social bond fund with Big Issue Invest. "Social investment is encouraging individuals to invest in organisations that improve the lives of people and communities, and helping the sector become self-sustaining in the long term," said Campbell Fleming of Threadneedle.
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