Social Investment Tax Relief
Tax reliefs are a vital policy tool used by governments for a range of purposes
- 90 Number of organisations that have used SITR to raise capital
- £15m Amount of capital raised through SITR
- 30% Amount of tax relief individual can claim on their investment
Challenge
Tax reliefs have been highly effective at encouraging investment into businesses pursuing profit yet until recently the same incentives have not been available to encourage investment into enterprises and charities with a social objective serving the public good. The result has been to make it harder than necessary for social enterprises to attract the patient, affordable capital they need to grow and created a demand to level the playing field.
Approach
Our approach has been to work with partners to persuade the Government to create a new relief called Social Investment Tax Relief (SITR). This targeted relief allows investors to claim a 30% income tax relief on their investment, via shares or debt, into qualifying social enterprises and charities.
SITR can help social enterprises and charities scale their impact by raising investment from individuals: from retail to high-net-worth investors. Over the past five years, we’ve supported a wide range of organisations to use the tax relief through our GET SITR campaign, which offers specialist legal support and free resources. We’ve also worked alongside partners such as Resonance and Social Enterprise UK to lobby the Government, gaining cross-party support to retain and extend the tax relief.
Impact
SITR was ranked 4th out of 46 in a Europe-wide study on the effectiveness of tax incentives in fostering investment into SMEs and startups. SITR has supported 90 organisations to raise £15m worth of social impact investment. The complexity and trading restrictions imposed on SITR mean this is well below the £83m predicted. Yet SITR has provided a vital instrument to create regional SITR funds, in community share raises, and in enabling individuals to offset the risk of providing the affordable patient capital that is so vital to social enterprises and charities.