Sector warns social investment relief excludes social companies and large charities

Sector warns social investment relief excludes social companies and large charities
Civil Society Finance, By Vibeka Mair

Social Enterprise UK has raised concern that the new social investment tax relief will exclude companies limited by guarantee with a social mission, but the CIC Association argues it only costs £15 to convert to a CIC structure, which is eligible for the relief.

And the relief is also likely to exclude some large charities, as it has a maximum limit on employee numbers of 500 for eligibility.
Today the government has released its response to a consultation on social investment tax relief into social enterprises. It has decided that organisations eligible for the relief will have to be regulated by a body checking for social purpose, such as charities, community interest companies and community benefit societies.

Companies limited by guarantee (CLGs) will be excluded. Nick Temple, director of business and enterprise at Social Enterprise UK, said:“While the Chancellor’s confirmation of tax relief for social investment is to be welcomed, as is the Treasury’s work to date on this issue, it is disappointing to learn that not all types of social enterprises will be able to benefit.

“Genuine social enterprises with a social mission, many of which are companies limited by guarantee, must be helped, not hindered, when trying to access social investment. Excluding large numbers of them doesn’t help create the level playing field for all businesses that this tax relief was intended to address.”

However, government says that opening up the relief to organisations unregulated for a social purpose would open it to risk of abuse. It says it is reluctant to set up a new regulatory process for organisations like CLGs, and argues that CLGs and other organisations can convert to CICs easily.

John Mulkerrin, director of the CIC Association, agrees: “It only costs an extra £15 to be a CIC for them, and so far no one has been able to give me one genuine reason (and I have been seeking it for over a year) why a social enterprise CLG wouldn’t be able to gain CIC status and qualify for the relief. Or even just have a wholly-owned CIC subsidiary for £35; no other solution is as simple, effective or cheap for them. This is exactly what CIC was intended to do.

“What is the negative of a CLG adopting CIC status?”