HM Treasury have released a summary of the responses to their 'Call for Evidence on Social Investment Tax Relief' (SITR).
SITR is designed to give tax relief to encourage private investment into social enterprises. Individuals that make SITR qualifying investments get Income Tax relief of 30% as well as Capital Gains Tax (CGT) relief.
The goal of the relief was to help social enterprises raise finance by providing an incentive for private investors. The Call to Evidence was to review the take up of the scheme and to review whether it is achieving its objectives.
Respondents commented that:
- Low awareness was the greatest issue behind the low take up of SITR for social enterprises and investors. (£11.2m has been raised through the SITR scheme since 2014).
- Three-quarters of respondents reported difficulty in using SITR, this included the complex eligibility restrictions and limited resources within social enterprises.
- Intermediaries were often relied upon by social enterprises to secure SITR.
- Social enterprises did not necessarily want to grow and those that did still have limited funding options.
- Social enterprises would use SITR if they were eligible, but a lack of internal resources and lack of investors was viewed as problematic.
- Changes to the scope of permitted activities could increase the take up of SITR.
- There was a perceived lack of transparency with the HMRC advanced assurance service.
- Private investment was considered central for the development of social enterprises in terms of their capital and the expertise and networks provided by investors.
- Private investment was often sought as more traditional forms of funding are scarce, harder to secure or expensive.
- The majority of advisers in the UK do not provide philanthropic or advice on the social impact of their investments.
- Investors expected their investments to make a social difference and some viewed SITR investments as not purely financial.
- Respondents considered tax relief provided by SITR an important incentive to invest.
- SITR funds are sitting on capital due to a lack of enterprises seeking SITR.
- In Budget 2021 the Government announced that SITR would be extended for a further two years until April 2023.
Useful guides on this topic
Social Investment Tax Relief (subscribers)
What is SITR? What are the qualifying conditions for SITR? What relief is available?