Raising investment for a social enterprise can be challenging. In response to growing demand, the Social Investment Tax Relief scheme was created. This scheme provides financial incentives for investors to provide social enterprises with the capital they need.

In this article, we will explain what the Social Investment Tax Relief scheme is and how you can use it for your social enterprises.

Social Investment Tax Relief – how does the scheme work?

Social Investment Tax Relief (SITR) gives investors a range of different tax reliefs and benefits.

The scheme was introduced in 2014 after widespread consultation with stakeholders in the UK’s growing social enterprise sector. By summer 2016, more 30 social enterprises have benefited from the scheme’s introduction.

The maximum amount of investment that you can receive through SITR is around £250,000 over a three-year period. We say “around” because the amount is not actually a fixed amount because the maximum amount is actually €344,000 so the limit is subject to currency fluctuations.

Social Investment Tax Relief – who can get the money?

SITR funding can be accessed by social enterprises if one of the two following conditions are met:

• The activity is a qualifying trade or,
• The organisation is preparing to carry out a qualifying trade within 2 years of receiving the investment.

A “qualifying trade” can be almost any trade except those listed below:

• Dealing in land,
• Banking and insurance broking,
• Property development,
• Generating or exporting electricity, and,
• Road freight transport for hire.

Social Investment Tax Relief – does my company qualify?

You can apply for the scheme if your company is a:

• community interest company (a limited company which operates for community benefit, rather than purely for profit),
• community benefit society with an asset lock,
• registered charity (both companies and trusts).

Your company needs to have fewer than 500 full time employees. Also, your company must not be listed on a registered stock exchange and it cannot have more than £15 million in gross assets.

Social Investment Tax Relief – what are the benefits for investors?

Investors receive two main benefits for funding social enterprises through this scheme. These are:

• They will receive a 30% income tax relief on the amount invested. This amount extends to a maximum investment of up to £1 million (this level of involvement would require an investor to provide capital to several social enterprises). It is also only available after the shares have been held for 3 years.

• Investors are also exempt from capital gains tax on their earning from their investment if the money is reinvested into another SITF-registered company.

Social Investment Tax Relief – we can help

If you would like advice about the Social Investment Tax Relief scheme and how it can apply to your social enterprise, we are more than happy to guide you through the process. Call us today on 01606 333 900 or email hello@burtonbeavan.co.uk.