The government will also consult on a new relief for indirect investment in social enterprises.
The move has been welcomed by the VCT industry and could be a real boost to the fledgling social impact community. Independent VCT specialist Martin Churchill described the trebling of relief as the real news to come out of the Autumn Statement for venture capital investors.
“The social impact investing relief is going to be a very interesting arena to look at,” he said.
While still small, the social investment sector has garnered interest recently as a number of newer, more inventive structures have been launched.
Jason Hollands, managing director at Bestinvest, explained the main benefit for the sector will be the longer investment horizon made possible by the greater sums of money that can be invested.
“This is still a nascent market, but by allowing bigger deal sizes, it might draw in a wider investor base, as well as provide scope to fund more ambitious projects,” he said. “The consultation around a Social VCT suggests they need a different type of scheme for smaller deals.”
The main trouble with social impact investing is it is generally low profit, and this has acted as a deterrent to investment in the past.
“Social impact ventures by their very nature are investing in non-profit organisations so the returns for the investor simply have to be quite low,” said Patrick Reeve, managing partner at Albion Ventures. “If they are, you will now have tax relief.”
