The Treasury launched its consultation on social investment tax relief (SITR) on 24 April.
SITR affords investors who invest in qualifying entities (broadly, charities, CICs or bencoms), a reduction on their income tax bill equivalent to 30% of the qualifying investment they have made.
Social enterprises accessing investment directly, as well as SITR funds, developed by the likes of Resonance and others, have harnessed private investment using this relief, which has helped to change the perception for many social enterprises about opportunities for growth.
There are, however, a number of barriers to overcome for organisations which want to take advantage of SITR and these have contributed to an under-usage of the relief since it was first introduced.
The Treasury’s consultation is therefore seeking to listen to the sector: to investors, intermediaries and to organisations which have or haven’t used SITR for a number of reasons. The broader the responses received, the better.
Stone King believes that SITR should be a useful tool to help social enterprises to attract investment from individuals who want to support early stage commercial initiatives delivering social impact. However, the SITR rules are, in our view, unnecessarily restrictive and we will be responding to the consultation. We will be focusing on the following key areas of change:
- Elimination of the seven year age limit for organisations receiving SITR qualifying investment as this disenfranchises mature social enterprises and most charities which are looking to develop revenue-generating projects.
- Reducing the excluded activities to enable social enterprises which combine property ownership with the provision of support services for residents, such as care homes, nursing homes and accommodation for looked after children.
- A review of the requirements and restrictions of a social enterprise group, e.g. to enable SITR investment to be made into a wholly-owned subsidiary of a social enterprise. Established charities and other social enterprises developing new revenue producing projects will often want to ring-fence risk by housing the project in a subsidiary structure. Current SITR rules do not permit this.
The consultation ends at 11.59pm on 17 July 2019.
If you have any feedback which you would like us to include in our consultation response please contact Nicole Reed, or if you would like to find out more and respond directly, please visit the consultation page.