Your IndustrySep 4 2014

Advisers lack knowledge on social tax relief: poll

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A poll commissioned by Big Society Capital has found that high net worth individuals face missing out on the benefits of the new ‘social investment tax relief’ because their advisers do not know enough about it.

Only 14 per cent of independent financial advisers feel confident that they understand social investment tax relief, according to research conducted by Opimium Research amongst 203 financial advisers, and so the majority would be unlikely to provide advice to clients.

However, almost a quarter of IFAs said that their clients have expressed an interest in social investment.

Big Society Capital said in a statement: “Now that the social investment tax relief sits alongside venture capital trusts, enterprise investment schemes and seed enterprise investment schemes, advice concerning the tax break advantages that are available for investing in social enterprises and charities is crucial.

“However, while 38 per cent of IFAs have discussed social investment with their clients, the findings highlight a need for far greater understanding.”

Social investment tax relief received Royal Assent in July 2014 and offers individual investors a 30 per cent tax relief on up to £1m invested in charities or social enterprises per tax year.

Research commissioned by the City of London Corporation and Big Society Capital previously suggested the relief could generate up to £480m of new investment over the next five years.

Aine Kelly, head of financial sector and investor engagement at Big Society Capital, said: “We know that there are many high net worth individuals who want to make a social impact with their investments.

“Independent financial advisers play a key role in enabling this to happen. By advising their clients about the social investment tax relief, more wealthy individuals can become social investors, opening up access to greater amounts of finance to the sector.

“But charities and social enterprises could miss out on much needed capital if IFAs’ confidence levels around the social investment tax relief are not improved.”

Gavin Francis, founder and director of Worthstone, which advises IFAs in the social investment market, said: “The financial planning profession should be aware of the extraordinary pace at which the social investment market is developing.

“Social investment tax relief is a tax reducer that helps the most vulnerable in society and stimulates UK PLC whilst offering the potential for an investor to recycle their capital; it doesn’t get much better than that when it comes to wealth deployment.”