Detailed guidance to support the government’s new tax relief scheme for social investment has now been published. The relief is intended to encourage individuals to support social enterprises and help social enterprises access new sources of finance. A summary factsheet has also been published.

Details of the scheme are as follows:-

• Individuals making an eligible investment at any time from 6 April 2014 can deduct 30% of the cost of their investment from their income tax liability for 2014/15 (or the relevant later year in which the investment is made).
• 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 Seed Enterprise Investment Scheme and Enterprise Investment Scheme which are subject to their own annual investment limits.
• The minimum period of investment is 3 years.
• If individuals have chargeable gains in 2014–15 (or a later year) they can also defer their Capital Gains Tax 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.
• To ensure investment is directed to the organisations which need it most and to meet EU regulations, the investment and the organisation receiving it must meet certain criteria.
• Organisations must have a defined and regulated social purpose. Charities, community interest companies or community benefit societies carrying out a qualifying trade, with fewer than 500 employees and gross assets of no more than £15 million may be eligible.
• Social enterprises will need to apply to HMRC after the Finance Bill has been passed into law to confirm that they meet the requirements of the scheme. Investors will be able claim tax relief once this confirmation has been given.
• Under EU rules governing the initial introduction of the social investment tax relief, individual enterprises can only receive a certain amount of government subsidised investment. The limit is €344,827 (about £290,000) over three years.