Jackie Hall

Written by: Jackie Hall

Jackie Hall

Partner

Should social enterprise and charities be mourning the loss of Social Investment Tax Relief

SITR was introduced to help social enterprises and charities raise funds by allowing individuals to invest tax efficiently. By investing in qualifying enterprises individual investors can claim income tax relief of 30 per cent on share purchases or loan funding for a project.

The relief sounds attractive, but statistics show that take-up of the relief is far short of the amount anticipated by the government when it was first introduced in 2014, with only £14 million of investment having been raised which amounts to less than 20 per cent of the forecasted £80 million. Part of the reason may well be the relatively short investment history. Unlike charitable donors who are making gifts with no anticipation of receiving anything back, investors attracted to SITR tend to be looking for a return, or a longer-term investment extending beyond the tax relief. They could instead receive similar relief on an investment in qualifying EIS shares for example. So, the SITR alternative can be a tricky sell for financial advisers. In some respects, the investment history is just making an impact when we are only months away from losing the relief.

Some argue that the relief was never fit for purpose, is not attractive to investors and has been unsuccessful, whilst others campaign for its extension. Meanwhile, due to a sunset clause in the legislation, SITR will come to an end in April 2021 unless action is taken to amend it. In April 2019 the government issued a call for evidence on the relief, but the results still haven’t been published, which is itself a concern and is doing nothing to alleviate the uncertainty and concerns for social enterprises who have come to rely upon this type of funding.

In these uncertain times, where social enterprises have been hit hard by shortfalls in income, there is a strong argument for reforming this relief rather than losing it altogether. There is no doubt that the government is simply adding to the uncertainty by appearing to not tackle the issue in good time. 

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