Tories promise tax breaks and back SEIB

The Tories are calling for tax breaks for social enterprise.

The specifics are unclear but, given that (a) only a tiny proportion of social enterprises make big enough profits for corporation tax to hit hard and (b) an incoming government is unlikely to offer pay social enterprise’s employers’ NI contributions itself, I imagine this means tax breaks for investors putting cash into social enterprises.

Given that, based on figures in the State of Social Enterprise Survey, between 72% and 93% of organisations currently identifying as social enterprises as not set-up to take equity investment, there are challenges involved in targeting tax breaks at potential investors – though I do think the case for more equity investment in social enterprises is a good one.

The Third Sector story suggests the thoughts of Shadow Third Sector Minister, Nick Hurd, are broadly linked to the Social Enterprise Investment Bank – an idea that seems likely to become a social enterprise equivalent of The Compact, a conference pleasing theoretical concept which fascinates umbrella bodies deeply but ultimately operates in a geostationary orbit above the people who are getting on with doing social change.

I’m not discounting the possibility that there are some social enterprises out there who could take on loan finance with a realistic expectation of paying it back but who can’t get that cash from existing sources, but I’d be very surprised if there’s enough of them for either the Lobby or politicians to be able to justify making this project a major priority.

I may be wrong but the repeated calls for the Bank by leading figures in the Lobby seem, so far at least, very short on clear evidence of the need for the Bank – I haven’t actually read any fact-based evidence of need at all beyond the repeated assertion that it’s hard for social enterprises to get loans but I’m more than happy to proved wrong on this.

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5 responses to “Tories promise tax breaks and back SEIB

  1. You seem to have forgotten about VAT. The turnover threshold is very low at £68,000 when it then applies – a single person working hard can (and does) achieve this so a small collective pulling together can soon reach the tipping point. If we can’t have exemption from this ‘luxury’ (?) tax, can’t we have a different threshold of £100k to give our SEs chance to get on their feet?

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  2. beanbagsandbullsh1t

    As with my slightly tongue-in-cheek examples (corporation tax and NI), VAT is not really what Hurd’s talking about.

    But I think you do have a point. I can see arguments for some different VAT thresholds for some social enterprises – or possibly some social enterprise activities. The problem with just hiking up the threshold to £100K is that the social value of doing this depends very much on what the social enterprise does.

    I can imagine there are good arguments for it terms of community-owned village shops, for example. But – in the absence of stringent criteria for what a social enterprise has to do – it would be a regressive market distortion in (for example) web design.

    Some people registered as a CIC would be able to get a 17.5% advantage over some people registered as a conventional CLS without necessarily doing anything more socially useful at all – and certainly without there being any specific greater social value to the work that was being under-taxed.

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  3. I was thinking specifically about the low level care direct payments agenda, but didn’t realise you have some sort of worthiness shade card going – surely being not for [private] profit is precisely that? For example my web design SE client subsidises an online radio service for schools if there is market distortion most of those families involved would be saying ‘fine’ so I’d suggest it shouldnt be activity specific.

    The bottom line is that if people are willing to forego personal gain to run a social enterprise as a CiC or whatever then we should access a tax advantage to make our community benefits go further; we’d have a lot more local impact with the money than the state.

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  4. beanbagsandbullsh1t

    Well, VAT is a tax usually based on what’s being supplied and who it’s being supplied to rather than who’s supplying it.

    I don’t think running a business that’s not for private profit, in itself, deserves any tax break beyond the already existing exemptions from taxes on profits. I do run a CIC myself but I don’t accept that running a business as a CIC necessarily constitutes foregoing personal gain.

    And, for that matter, I don’t think that the choice to forego personal gain is, in itself, something that’s socially useful. The last thing I’d want is respect (or tax breaks) for being badly paid and well-meaning if what I’m doing is useless.

    I think tax breaks would be better targetted at enabling ordinary people to invest in social enterprises through bonds and share issues.
    Either along the lines of gift aid for social enterprise investments or having an extra allowance above the personal tax threshold for social investment.

    To make this work, though, the government would need to find a way to make social enterprise bond and share issues easier and cheaper to do.

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  5. Pingback: But who actually needs this Dave? « Beanbags and Bullsh!t

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