Big Society Capital (BSC) is an “independent financial institution with a social mission” established by the UK Government.
It has created a £5m ‘Crowd Match Fund’ to encourage social investment through crowdfunding and peer to peer. They have allocated £2m of that fund to the ThinCats “Community Chest” initiative, which supports loans to charities and Community Interest Companies that benefit from Social Investment Tax Relief (SITR).
The combination is a good one; it gives ThinCats investors access to a range of SITR tax efficient investments that offer an attractive return*, whilst also supporting a good cause. Big Society Capital is offering to provide up to half of the funding needed by each project and will start the bidding.
Acting as the sponsor, Community Chest will provide the Information Packs, focusing on viable, established businesses that provide community and/or social benefits. They will help structure the deal, obtain pre-approval of tax relief and distribute the tax certificates to lenders.
The tax relief and Big Society Capital support are intended to encourage private investment into a sector that has previously relied on grants and donations. Those sources of funding are now drying up, and the Government is keen to encourage a new approach by promoting the development of businesses which can help sustain charities and Community Interest Companies (C.I.C.s).
Since it was set up as an independent organisation in 2012, Big Society Capital has invested, along with its co-investors, over £285 million in specialist organisations who lend to charities and social enterprises, and this latest collaboration is set to improve access to funding for even more of these worthwhile organisations.
The loans will be different to the usual ThinCats listings; they are not backed by security, as all other ThinCats loans are, but through Social Investment Tax Relief (SITR) will provide access to 30% of the capital invested as a tax credit in the first year of investment, as well as a modest interest rate*. This will offer lenders opportunities to make a difference in their local communities, as well as the potential to earn a return on their investment.
How is Big Society Capital funded?
Big Society Capital receives its funding through the Dormant Bank and Building Societies Accounts Act 2008, which enables banks and building societies to voluntarily hand over money that has been unclaimed for over 15 years in dormant accounts. Find out more about BSC’s structure and funding.
For more information about Big Society Capital please visit www.bigsocietycapital.com.
*SITR is only available to UK income tax payers. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Capital is at risk.