The increase in the amount that younger charities and social enterprises can raise through Social Investment Tax Relief (SITR) to £1.5 million, announced in the Autumn Statement, is encouraging says Big Society Capital.
Latest HMRC figures show that the number of charities and social enterprises seeking to use SITR has more than doubled in the last six months; interest from investors has also grown with triple the number claiming the tax relief.
Simon Rowell, Senior Director Strategy and Market Development, said:
“Today is a step forward for social investment tax relief. We welcome the modest increase to the size of investment able to be raised using SITR. It will enable a range of younger, dynamic charities and social enterprises, as well as recent spin-outs, to use capital to boost their operations to reach more people and try new business models.
However, whilst some helpful improvements have been made, SITR still needs to be put on a level playing field with other private tax relief schemes, such as EIS and VCT. Therefore, we implore the Chancellor to consider how the government should be further supporting investment into the social sector to encourage innovation and growth, but also to reach more people in need.”
Recent research by NPC for Big Society Capital shows that charities and social enterprises have received about £3.4m through SITR in its first two years through to summer 2016. Over 170 investors have invested into SITR deals across the UK, with an average investment size of around £100,000.
Gavin Francis, founder of Worthstone, a social investment consultancy for wealth advisers that has been looking to advance the scale of SITR for over 3 years said:
“From the concept of SITR to the reality, we’ve been working towards this expansion, which we welcome as a clear signal from government to investors and a significant boost to the market. Our IFA subscribers say that there is latent demand from clients and with the number of SITR funds set to grow, this will lead to increasing capital flows. With over 20 pioneering firms having already advised clients on SITR investments, we believe this development provides the platform for an increasing number of investors and their advisers to deploy mainstream capital.”
South Bristol Sports Centre is one of the most recent social enterprises to benefit from the tax break, having received £250,000 in investment from the Resonance Bristol SITR Fund, as part of a £1m raise. The centre works with young people in one of the most deprived areas in Bristol and is using the investment to finance the construction of six five-a-side football pitches.
Ben Ferris, Director of South Bristol Sports Centre, said:
“We engage young people via their passion for sports to help increase their confidence, skills and aspirations. The investment from the SITR Fund is supporting our growth and has provided a great opportunity to increase our provision for the local community. We hope that this increase in SITR will help other charities and social enterprises bring in the investment they need to grow and develop their services, reaching more people across our local communities.”