New social energy bond targets 6.5% return

Written by Lisa Stanley Mann on 9th Nov 2017

If you are cheesed off with the Big Six energy suppliers and have some money set aside to invest, then you might be interested in the latest social bond from Ethex.

OurPower, a relatively new not-for-profit energy supplier, has launched the bond to raise £4.5m to support its mission of working to make energy fairer, while reducing levels of fuel poverty.

The three-year bond aims to provide a 6.5 per cent annual return.

It is already proving very popular among high net worth investors eligible for Social Investment Tax Relief (SITR), although the £300,000 SITR investment limit has already been reached*. (More on this below…)

“OurPower’s balance of commercial and social is really impressive and exactly what I think a social business model should be striving for in this area….”

Michael Sheen, Actor and Patron of Social Enterprise UK

What is SITR and how does it work?

Social investment tax relief (SITR) is the government’s tax relief to encourage investors to support social enterprises and helps those organisations access new sources of finance.

According to the government website, “individuals making an eligible investment can deduct 30% of the cost of their investment from their income tax liability, either for the tax year in which the investment is made or the previous tax year (if 2014/15 or later). The investment must be held for a minimum period of 3 years for the relief to be retained.

“If individuals have chargeable gains in that tax year, they can also defer their capital gains tax (CGT) liability if they invest their gain in a qualifying social investment. Tax will instead be payable when the social investment is sold or redeemed. They also pay no CGT on any gain on the investment itself, but they must pay income tax in the normal way on any dividends or interest on the investment.”

Under current HMRC rules only the first £300,000* of qualifying investment is eligible for SITR – this threshold has now been reached for Ethex’s OurPower bond offer.

However, this threshold is due to change to £1.5 million under the terms of the 2017 Finance Bill currently going through Parliament, and once the Bill is passed the £1.5 million threshold will be backdated to April 2017. This could benefit investors in OurPower who have missed the boat for the first £300,000.

For more investments delivering positive environmental change, such as Thrive Renewables, take a look at our investments section.

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