The government is consulting on changes to the Social Investment Tax Relief (SITR) accreditation process for companies set up to deliver a Social Impact Bond (SIB) contract, with the aim of simplifying tax compliance and stimulating greater investment in initiatives to tackle social problems
The changes are intended to make the accreditation process easier for companies that enter into multiple spot purchase SIB contracts, by eliminating the need for separate accreditation of each contract.
They affect the Tax Relief for Social Investments (Accreditation of Social Impact Contractor) Regulations 2014 and the Cabinet Office guidance concerning the accreditation of social impact contractors.
SIBs are a new tool designed to unlock private finance and public investment so that organisations which are best placed to tackle social problems can do so on a payment-by-results basis.
Companies set up to deliver a SIB contract, known as social impact contractors are eligible for investment attracting SITR where they have been accredited by a Cabinet Office-run accreditation process and have set up a special purpose vehicle (SPV) solely for the purpose of delivering the SIB contract.
As they are currently written, the 2014 Regulations and the Cabinet Office guidance for the accreditation of social impact contractors suggest that a social impact contractor delivering a spot-purchase SIB would need to seek accreditation for each separate contract it enters into with different contracting authorities.
The consultation point out that this would place a significant burden on the social impact contractor and may deter investors.
The proposals would make minor amendments to the 2014 Regulations and providing more specific information in the guidance, so that a social impact contractor can gain accreditation for the first spot purchase SIB called off from a particular framework, and then maintain accreditation (and hence eligibility for SITR) by entering into follow-on spot purchase contracts in essentially the same form.
The consultation document suggests that this could be done by setting the duration of accreditation and specifying that the social impact contractor must be party to one or more contracts with contracting authorities in materially identical terms to the first call off contract (known as the ‘no gaps condition).
During the specified period of accreditation as long as the 'no gaps condition', and all other conditions of accreditation, are met, the social impact contractor will remain an accredited social impact contractor on a rolling basis.
The consultation asks for views on these changes and is open for comment until 25 November 2015.
The consultation is available here
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