Factsheet: Social Investment Tax Relief

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The government has introduced a new tax relief scheme for social investments to encourage individuals to support social enterprises and to provide social enterprises with new sources of finance.  The investment must be in newly issued shares or qualifying debt investment in a social enterprise.

1. How investors benefit

  • Individuals making an eligible investment at any time from 6 April 2014 can deduct 30% of the cost of their investment from their income tax liability for 2014/15 (or the relevant later year in which the investment is made). The minimum period of investment is 3 years.
  • If individuals have chargeable gains in 2014-15 (or a later 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.

2. Eligibility

The investment and the organisation receiving it must meet certain criteria:

  • Organisations must have a defined and regulated social purpose.
  • Organisations must be either charities, community interest companies or community benefit societies carrying out a qualifying trade.
  • Organisations must have fewer than 500 employees.
  • Organisations must have gross assets of no more than £15 million.
  • Within 28 months of the date of the investment, all the monies raised from that investment must be employed for the purposes of the chosen trade,

Other conditions and criteria also apply, which can be found in the HMRC guidance.

3. How enterprises apply for approval

Social enterprises will need to apply to HMRC after the Finance Bill has been passed into law (which is due in July 2014) to confirm that they meet the requirements of the scheme. Investors will be able claim tax relief once this confirmation has been given.

4. Social impact bonds

Investments in social impact bond companies, which enable social enterprises to deliver services to achieve certain contracted social outcomes, will also be eligible for the tax relief. The guidance and legislation covering the accreditation scheme for companies issuing social impact bonds is being worked on and will be available in the summer of 2014.

5. Maximum amount of SITR investment

  • Social enterprises – Can receive up to €344,827 (about £290,000) over three years. The exact sterling equivalent is the spot exchange rate on the date of investment.
  • Individual investors – Can invest up to £1,000,000 and can invest in more than one social enterprise. This is independent of any investments under Seed Enterprise Investment Scheme and Enterprise Investment Scheme which are subject to their own annual investment limits.

If you are interested in making or receiving social investment under this scheme please contact us.

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