LONDON (Thomson Reuters Foundation) - British finance minister George Osborne announced a 30 percent tax relief rate on social investments on Wednesday, a move welcomed by campaigners and industry experts as potentially unlocking millions of pounds for social enterprises.
"We're backing investment into social enterprises with a social investment tax relief at a rate of 30 percent," Osborne told parliament in his annual budget speech.
Nick O'Donohoe, chief executive of social investment bank Big Society Capital, said the move would stimulate significant additional investment into social enterprises from a wider pool of investors.
"The chancellor (finance minister) has today given a very welcome pledge to set the rate of social investment tax relief at a level we believe will encourage more investors to put more money into social enterprises," O'Donohoe said in a statement.
Big Society Capital estimates the tax relief could unlock nearly half a billion pounds in finance for charities and social enterprises over the next five years.
Like charities, social enterprises focus on addressing social problems or helping the environment but they need to make a profit to survive and have often struggled to raise finance.
The Social Economy Alliance said the new tax relief had the potential to fuel Britain's growing social economy, made up of social enterprises, cooperatives and charities.
“This is excellent news for Britain's social economy," Jonathan Jenkins, spokesperson for the Social Economy Alliance, which consists of more than 100 organisations in the social enterprise sector, said in a statement.
"Many thousands of new and maturing social ventures need finance to grow and reach their true potential."
Jenkins, who is also chief executive of Social Investment Business, urged the government to promote the tax relief among UK investors.
“It’s a critical time for the social investment market. The world is increasingly relying on social economy organisations to tackle some of its most pressing problems. But, like all businesses, they need capital and investment to survive.
"This will be a missed opportunity if it's not fully promoted by government, who should work with the sector to market and promote the tax relief, so more businesses and investors can improve their social impact."
The rate, which will match the government's Enterprise Investment Scheme and Venture Capital Trusts, will apply to investments made from April 6 and allow eligible social enterprises to receive a maximum of around 290,000 pounds over three years.
Final legislation on the tax relief will be published on 27 March.
There are 70,000 social enterprises in the UK, contributing £18.5 billion to the economy and employing almost 1 million people, according to umbrella organisation Social Enterprise UK.