Gov’t to broaden social tax relief but with restrictions

The government plans to enlarge the social investment tax relief scheme, however certain firms who benefit from government subsidies of renewable energy will be excluded from also benefiting from a tax-advantaged venture capital scheme.

According to Autumn Statement documents, the government will seek EU approval to increase the investment limit to £5m per annum, per organisation, up to a maximum of £15m per organisation, and to extend the relief to small-scale community farms and horticultural activities.

The changes will come into effect on or after 6 April 2015, subject to state aids clearance.

The government will make special purpose vehicles for subcontracted and spot-purchase social impact bonds eligible for social investment tax relief through secondary legislation in the autumn next year. The government will consult in early 2015 on introducing a Social Venture Capital Trust in a future finance bill.

All UK energy generation which comes from community-owned projects, undertaken by qualifying organisations, will be eligible for social investment tax relief, with effect from the date of its expansion.

However, it will then stop being eligible for enterprise investment schemes, seed enterprise investment schemes and venture capital trusts.

“All other companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from also benefiting from EIS, SEIS and VCTs with effect from 6 April 2015,” the document said.

Alongside this, the government said will make it easier for qualifying investors and companies to use the tax-advantaged venture capital schemes by launching a new digital process in 2016. A new format for VCT returns will also be developed.