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City calls for VCT-like tax breaks on social impact investments

City calls for VCT-like tax breaks on social impact investments

The City of London Corporation is lobbying the government to give social impact investments similar tax reliefs to those enjoyed by venture capital trusts (VCT) and enterprise investment schemes (EIS).

The local authority for the Square Mile is working on a report which aims to convince the Treasury that it should introduce tax breaks on social impact investments.

The report will look at whether there is a case to set up a specific tax relief for social impact investing or widen the remit of existing incentives such as those that apply to VCTs to suit social investments.

The report has been written with social impact investment promoters Worthstone and Big Society Capital.

Gavin Francis, founder of Worthstone, said his research suggested around 75% of advisers’ clients would be interested in social impact investing.

'Social investing is the fastest growing area of investment,' he said. 'People are thinking about the next generation and the legacy they will leave to their children.'

The Boston Consulting Group has estimated that the social impact investment market in the UK will grow to £1 billion over the next five years.

The Financial Services Authority (FSA) has said it will not discourage social impact investing but urged advisers to ensure it was suitable for their clients.

Responding to advisers' concerns that the regulator would penalise them in the event of a claim, even if they carried out thorough due diligence, the FSA said social impact investments should be treated like the rest of a clients’ portfolio.

David Geale (pictured), FSA head of investments policy, said: 'We are seeing market developments and we recognise that what consumers want is changing.’

'But just because an investment has a social benefit doesn't mean that regulation falls away.'

'In many cases it won’t have mass market appeal, but for clients whose objectives are not just income and capital growth, social impact investments can be considered. It’s not in our rules to encourage it, but equally we don't seek to discourage it.'

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