Guest post from Tom Hall who is Scope’s Director of Philanthropy and Corporate Partnerships
As we digested what it meant to be an ‘aspiration nation’, another Budget announcement flew under the radar. The Chancellor has revealed that the Government will be consulting on introducing a new tax relief for social investment.
This is good news for charities and the people they work to support. Especially as so many are finding it increasingly difficult to generate the same level of donations from traditional sources
Scope has pioneered social investment because we think it will help charities and social enterprises like us grow efficiently and become more sustainable in the future.
Scope investment bond
We launched our Bond back in 2011, successfully raising £2 million at 2% repayable after three years.
The money has been invested in expanding our network of shops, with each new shop bringing in about £30,000 a year to support our work with disabled people and their families. We’ve also used it to encourage 10,000 more people to regularly donate to Scope. All this will give us sustainable unrestricted income to fund our key work, supporting disabled people and their families through programmes like our network of parent befriending groups.
We have already paid our first interest payment (these are to be paid twice a year) and were delighted to win the Sustainable City Award for sustainable finance this week.
Having successfully launched the Bond and accessed finance in this way, we are now looking at other enterprising activities that give investors the chance to see their money make a difference to the lives of disabled people.
Whilst our bond was a success we felt that it would have been even more successful if our investors could have received some form of tax relief on their investment. There is currently no tax relief available for investors who choose to lend to charities and social enterprises through products such as the Scope Bond Programme.
We believe tax relief would help charities to overcome the barriers they face around being about to pay fully commercial returns and would incentivise investors who want to see social as well as financial return on their investments.
Tax relief on charitable lending
A tax relief on charitable lending, for example of 5% per annum on the amount invested, could significantly raise the financial return and therefore appeal of social investments, helping encourage more people to invest in delivering social impact.
For example a tax relief of 5% per annum would have turned the a 2% return from Scope’s bond into a 4.5% return for the investor, allowing it to compete more favourably with traditional products on the market, whilst having the additional benefit of supporting families with disabled children.
Whilst we don’t think that charities can become reliant on investments secured through loans or bond issues and that these products can only ever be part of a charity’s financing, we believe that there it is necessary for charities to explore more creative and efficient uses of funding, particularly in the current economic climate. Tax relief will help charities and investors move in this direction, become more sustainable and deliver greater social impact.