Peer-to-peer lender ThinCats has developed a socially impactful way for investors to boost social enterprises while enjoying up to 30 per cent tax relief in the first year.
Community Chest, the new peer-to-peer for good investment platform will allow investors to benefit from social investment tax relief (SITR) or community investment tax relief (CITR).
Depending on their client’s investment horizon, advisers can either help their clients to achieve 30 per cent SITR in the first year of a three-year loan, or CITR at 5 per cent a year on a five-year loan.
According to ThinCats founder Kevin Caley, this is the “UK’s first peer-to-peer for good proposition”.
He said: “Community Chest will allow investors to provide much-needed funding for social enterprises while also making a strong tax-efficient return on their investment.”
Mr Caley said this might attract those higher-rate investors still waiting for clarity on Innovative Finance Isas from the FCA - which is expected later this year - as they could achieve tax relief now, outside of an Isa wrapper.
The 5 per cent CITR available is, Mr Caley explains, equivalent to 8.3 per cent before tax to a higher-rate tax payer and would be in addition to any annual Isa allowance they already have.
The new proposition uses ThinCats’ platform, where lenders can take a fixed income investment in established social businesses through an online auction.
However, Community Chest operates differently to ThinCats’ regular secured loans. The prime investor benefit, according to Mr Caley, is the tax relief from the government.
In order to qualify for the tax relief, loans must be held for a fixed term, so they cannot be sold on the ThinCats secondary market.
Mr Caley added: “This tax relief is only available on unsecured loans so this represents a significant difference from the normal secured ThinCats loans.
“I believe Community Chest will be popular with investors looking to diversify their portfolio, while delivering a vital new route to funding for social enterprise across the UK.”
|The first deal from Community Chest|
£500,000 loan to ART Business Loans, a community eevelopment finance institution providing funding to small and medium sized businesses in the West Midlands.
One business owner who has already benefitted from ART is Michelin star and Great British Menu winning chef, Glyn Purnell, who opened his own restaurant in Birmingham with the finance it provided.
The government consulted on the rules to include peer-to-peer loans within Isas in 2014, with a view to legislating to allow peer-to-peer loans to be held in an Isa from 6 April 2016.