Social Investment Tax Relief: What does it mean for the voluntary sector?

Earlier this week, the government published its response to the Social Investment Tax Relief (SITR) consultation that took place over the summer.

The aim of SITR is to attract more investment from private individuals into charities, community interest companies, and community benefit societies. The idea is to improve access to finance so these organisations can expand their activities and thrive.

According to research by Big Society Capital and City of London, a tax relief of this kind could generate £165m of investment over a three year period from high net worth individuals (those with investible assets over £100,000).

NCVO submitted a response to this consultation arguing that a well-designed tax relief could help organisations but suggested a number of changes to the government’s initial proposals including:

  • removing the size limit on organisations that are eligible for investment
  • removing or significantly increasing the limit on the amount that may be invested per organisation from €200,000
  • including trading subsidiaries wholly owned by charities, CICs and Community Benefit Societies in the list of eligible organisations
  • building in periodic reviews of the tax relief so that its effectiveness can be measured.

While the government’s response did not take on board all the changes that we proposed, it did make some changes that will improve the relief.

Some positive changes

Treasury says it will increase the size of organisations that are eligible for investment from 250 employees to 500 employees with gross assets of less than £15m. This will ensure that the tax relief reaches more organisations, although we would still like these limits to be removed so larger organisations can also benefit.

The minimum investment period (the length of time that investors would have to commit their money) has been reduced from five years to three years, which should encourage more investors to use the scheme as they will be able to get their investments back within a shorter period of time.

Room for improvement

Unfortunately, the consultation did not propose to introduce a regular review. We think this is essential to review the effectiveness of the relief and enable the government and sector to look at its implementation and assess its effectiveness.

The government also did not outline what the “rate of relief” would be for investments made via SITR. NCVO made clear in its consultation response that the rate of relief should not be greater than the relief of higher rate Gift Aid (25%) to reduce the risk that individuals could shift their money from donations to social investment. The aim of social investment should be to attract additional funding into the sector, rather than shifting money between different types of relief.

As announced in the Autumn Statement last week, the government will be publishing a “social investment road map” which will provide more details on how SITR can be improved. For example, it is hoped that EU state aid clearance will enable the relief to be expanded to increase the amount that investors can put into each organisation – something that we supported in our consultation response.

Tell us what you think

NCVO will continue to engage with the Treasury as it develops legislation and to seek further improvements. As always, we’d welcome the views of our members on this consultation and social investment, so please leave comments below.


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Andrew was NCVO’s senior policy officer. He covered issues around funding, social investment, tax and the impact of the economy on the voluntary sector. Andrew has left NCVO, but his posts are kept here for reference purposes.

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