Tax Breaks Could Encourage “Social Investment”

March 7, 2013 Taxation in UK

Social investmentLONDON – Charities, community groups, and other social organizations around the UK could reduce their reliance on government grants, if tax breaks are offered to individuals who make “social investments”.

According to a new report jointly released by Big Society Capital and the City of London Corporation on March 5th, instating tax breaks on “social investment” could result in a GBP 480 million increase in the amount of funding being provided by individuals to social programs in the UK.

Big Society Capital describes social investment as “…the provision and use of capital to generate social as well as financial returns”, and suggest that there is a growing demand for social investment opportunities among wealthy individuals, especially those with investment capital exceeding GBP 100 000.

According to the newly published report, the availability of tax incentives is one of the most influential factors considered by potential investor looking to put their money into social projects.

However, currently investment into social programs in the UK often does not qualify for any tax breaks, as the available incentives are aimed at equity based funding, while social organizations predominantly rely on unsecured debts for financing.

Offering tax incentives for social investment would not only help the social sector expand and provide greater services to their target groups, but would also allow social organizations to rely less on grants and charitable funding from the government.

If tax breaks for social investment are offered, the total amount of funding provided to social groups over the next three years could increase by GBP 165 million, and to a further GBP 480 million over the next five years.

Photo by Gnu2000