Social Investment Tax Relief
The government’s new tax relief scheme for social investment encourages individuals to support social enterprises and helps social enterprises access new sources of finance.
- 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.
- Eligibility – Organisations must have a defined and regulated social purpose. Charities, community interest companies or community benefit societies carrying out a qualifying trade, with fewer than 500 employees and gross assets of no more than £15 million may be eligible. Other conditions and criteria also apply, which can be found in the HMRC guidance.
- How enterprises apply for approval – Social enterprises can apply to HMRC to confirm that they meet the requirements of the scheme. Investors will be able to claim tax relief once this confirmation has been given.
- Maximum amount of SITR investment – Under EU rules governing the initial introduction of the social investment tax relief, individual enterprises can only receive a certain amount of government subsidised investment. The limit is €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.