Social Investment Tax Relief in 2015 – Infographic
The announcement in 2014’s Autumn Statement that the government is extending the social investment tax relief (SITR) scheme is another positive step in helping individual investors move their capital into impact-focused investments, and 2015 will see these changes come into effect. The relief allows investors making investments into “social enterprises” to claim a 30% income tax relief.
The introduction of social investment tax relief was significant because, for the first time, debt investment is eligible for reliefs that have only ever previously been there for equity (using EIS and SEIS). Social investment tax relief is comparable to these reliefs, with the maximum individual investment that is eligible at £1m.
The definition of social investment used is focused on legal structure – the investee organisation must be constructed as a CIC, a charity or a BenCom, which means companies limited by shares, for example, are excluded. This is due to the definition of a social investment or social enterprise being linked to the idea of an “asset lock” and it does limit the potential for the relief, in a space where many “social investments” are made into early-stage companies that are not structured in this way. However, it is a first step in recognising the importance of individual investors in this space, supporting them to make investments in companies focused on social impact.
Our investor network Clearly Social Angels is looking particularly to make social investment tax relief-eligible debt investments into CICs, BenComs and charities (the three legal forms currently eligible for this kind of investment), and with the first deal of £70k into food-waste charity FareShare South West taking place in November, it looks like the year ahead will be a busy one for individual impact investing.