Social enterprises and business rates in Wales
This week the Welsh Government’s Minister for Economy, Science and Transport announced two new business rates schemes. The announcement follows the Business Rates Review led by Professor Brian Morgan. The Welsh Government also recently ran a consultation on the business rates relief available to charities and social enterprises. This explored whether rate reliefs should be made available to social enterprises which are not currently eligible. You can read our response to this consultation on our website. The Minister said that she is still analysing the evidence with regards to social enterprises and is discussing the recommendations concerning relief levels for charities and social enterprises with the UK Government and other devolved administrations.
Based on our experience of working with social enterprises, we believe that providing rate relief to social enterprises would be a positive step. It would mean that social enterprises and credit unions throughout Wales would be given the same economic advantage as registered charities. Social enterprises are businesses that are driven primarily by social objectives, where generated surpluses are reinvested for the social purpose, either in the business or the wider community. They seek to create employment and contribute to the local economy. Rate relief will support social enterprises to grow and develop and so maximise their impact on the local community.
Currently, social enterprises using the Company Limited by Guarantee legal model can also register as a Charitable Company. This allows them to access the trust funds available to charitable organisations and to gain rate relief from the local authority. But this approach has disadvantages for social enterprises. One of the drawbacks of charitable registration is that the legal form restricts the freedom to trade. It could also mean that social enterprises are less able to be entrepreneurial and react to changing market opportunities.
If rate relief is granted to social enterprises, we believe that there should be a strengthened definition of social enterprise. Social enterprises should fit the definition and characteristics of social enterprise laid down in the Welsh Government’s Social Enterprise Strategy for Wales in 2005. But the social ownership element of social enterprises should also be seen as a key characteristic in their definition. We would suggest five key characteristics for a revised definition of social enterprises:
1. They have a social, environmental, community or ethical purpose;
2. They operate using a commercial business model;
3. They have a legal form appropriate to ‘not-for-personal-profit’ status;
4. They will ensure that the people who benefit from the business will have a stake in its ownership and involvement in its governance;
5. They have a secure ‘asset lock’.
A robust definition of social enterprise that covers their key characteristics would help prevent misuse by other businesses claiming to be social enterprises.
Written by ceriannefidler
October 4, 2013 at 4:02 pm
Posted in social enterprise