By Kevin Caley on Friday 2 December 2016
As the dust settles on last week’s Autumn Statement, a wave of new policies focused on investment offer some hope that Theresa May and her Chancellor can live up to their pro-business rhetoric. The National Productivity Investment Fund, which will pump billions into infrastructure and innovation in the UK, dominated the headlines, while the £400million injection to support ‘scale-up’ businesses was also welcomed. One pro-investment policy, which has remained relatively under the radar though, was the considerable increase to the upper limit of Social Investment Tax Relief. This significant change will allow social enterprises to raise five times their current amount through this unique form of fundraising, benefitting more worthy causes, while enhancing the offering of those facilitating this type of investment.
Social investment tax relief (SITR) is a government scheme which encourages people to support commercially viable social enterprises by offering those who invest 30 per cent tax relief on the cost of their contribution. This means that a social business might pay 6 per cent interest on a three-year loan, yet lenders receive income equivalent to 16 per cent per annum, while also helping a worthy cause. Certain stipulations govern this scheme, for example, the investor must be a UK taxpayer and the investment must be held for three years if the full tax relief is to be retained. Those receiving the funds must also meet certain criteria, such as having a defined social purpose, fewer than 500 employees and assets of no more than £15million.
The current government clearly recognises the value of SITR. Last week the newly-appointed Chancellor Philip Hammond announced in his Autumn Statement that from April next year, the maximum amount of money that a social enterprise can raise through SITR will rise to £1.5million. With the limit currently at around £250,000 this will be a ‘game changer’ for the rapidly evolving social finance sector, allowing many serious business opportunities with social benefits to raise much-needed money.
ThinCats recently launched a new peer to peer initiative called “Community Chest”, which allows ThinCats members to take advantage of the 30 per cent tax relief on their investment into social businesses. I have little doubt that the increase in the SITR limit will improve the size, quality and sophistication of social businesses able to offer tax relief, and make the Community Chest proposition even more attractive. Providing savvy investors with an opportunity to earn very attractive returns on their money while also supporting worthy causes is set to be major growth area in the coming years.
For more information on SITR visit the www.communitychest.co.uk website.
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