The positive impact of Social Enterprise Businesses in the UK

Jun 27, 2018 | Tony Byrne's View


I recently attended an evening presentation by an organisation called Philanthropy Impact on the subject of Social Enterprise Businesses. Philanthropy Impact’s mission is to inspire philanthropy and social investment across borders, sectors and causes.

What I learned from the presentation is that Social Enterprise Businesses are increasing in popularity in the UK. So what is a Social Enterprise Business? By selling goods and services in the open market, social enterprises reinvest the money they make back into their business or the local community. This allows them to tackle social problems, improve people’s life chances, support communities and help the environment. So when a social enterprise profits society profits.

Social Investment Tax Relief

Interestingly there are a number of tax advantages for investing in social enterprise businesses. Individuals making an eligible investment can deduct 30% of the cost of their investment from their income tax liability, either for the tax year in which the investment is made or the previous tax year. The investment must be held for a minimum period of 3 years for the relief to be retained.

If individuals have chargeable gains in that tax year, they can also defer their capital gains tax (CGT) liability if they invest their gain in a qualifying social investment. Tax will instead be payable when the social investment is sold or redeemed. They also pay no CGT on any gain on the investment itself, but they must pay income tax in the normal way on any dividends or interest on the investment.

Under EU rules governing the initial introduction of SITR, individual enterprises can only receive a certain amount of government subsidised investment. The limit is €344,827 (about £250,000) over 3 years. The exact sterling equivalent is the spot exchange rate on the date of investment.

Individual investors can invest up to £1,000,000 and can invest in more than one social enterprise. This is independent of any investments under the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme which are subject to their own annual investment limits.

There are a range of entrenched social problems that government has consistently struggled to address, including children in care, homelessness, youth unemployment or long-term health issues. Traditional models have failed to deliver the innovation and focus upon results needed to make inroads with these issues. Social Impact Bonds (SIBs) bring together the public, private and voluntary sectors to solve these challenges by having a clear and relentless focus upon delivering the outcomes we want to see.

So what are Social impact bonds?

Social impact bonds (SIBs) are a commissioning tool that can enable organisations to deliver outcomes contracts and make funding for services conditional on achieving results. Social Investors pay for the project at the start, and then receive payments based on the results achieved by the project. There now exist over 30 SIBs across the UK, supporting tens of thousands of beneficiaries in areas like youth unemployment, mental health and homelessness.

I was so impressed with Philanthropy Impact’s presentation that I joined the organisation as a member straight away. I have little doubt that the trend in society is going to move more and more towards Social Enterprise Businesses s a force for good in society. So if you are interested in philanthropy and/or investment into Social Enterprise Businesses do get in touch with us. You know it makes sense.

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