Social Investment Tax Relief: one year to go

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Since its introduction in 2014, Social Investment Tax Relief (SITR) has helped to ensure social enterprises and charities have access to affordable capital, helping them to deliver on their impact goals. To date, we’ve seen over £17.8m invested into 110 organisations.

The recently published ‘No Going Back: State of Social Enterprise’ survey 2021 by SEUK highlighted that 22% of social enterprises operate within the most deprived areas of the UK, providing vital support and resources to the communities they serve. For them to continue helping to tackle the societal inequalities we face in the UK today, access to more patient and affordable capital is needed.

Allowing for Impact

SITR has proved an important tool in encouraging private investors into the social impact space and is key to the levelling-up agenda. The announcement in the Spring 2021 Budget on the extension of the sunset clause until 6th April 2023 provided a welcomed opportunity to continue to harness tax to create social impact.

Social Investment Scotland (SIS) is just one organisation which has done just that; recently announcing that they are due to return the final instalment of repayments to investors of the SIS Community Capital scheme in 2022 – the UK’s first co-investment fund to raise capital using SITR. Investors are expected to receive their full capital back, plus interest.

In total, £399K was invested into seven organisations operating across Scotland, here we take a look at the impact they are generating.

Street League supports 14-30 year olds to make the transition from school or unemployment into sustainable and fulfilling jobs. They use the power of sport to build positive relationships with young people. SITR helped to fund a new mobile team running rural academies across Scotland, tackle youth unemployment through a structured football and education programme.

Just Trading Scotland is a fair-trade enterprise set up to facilitate the import and distribution of fairly traded food products to the UK. By utilising SITR they were able to fund and facilitate a step-change in their growth as part of a rebrand and repackaging exercise to reach a wider retail market. In doing so they have been able to use trade to help grow a global supply chain that gives smallholder farmers and craft workers a fair and equitable way to sell their goods.

Broxburn United Sports Club plays an important role in the local community, providing a safe and social sporting environment for 18 member clubs and their teams as well as a venue for a wide range of social, health and well-being programmes and activities. SITR contributed to the funding of a new community wing within their facility at Albyn Park.

MacDougall of Dunollie Preservation Trust utilised SITR for operational funding to scale up and develop the Dunollie Project Ltd social enterprise. The fund supported conservation of the site to provide high-quality heritage experiences and engagement with the community through learning and volunteering opportunities for vulnerable young people and adults, retired local people and those with a special interest in heritage.

Scottish Traditional Boat Festival utilised working capital to support the transition from grant dependence to trading by taking on a 25-bed bunkhouse, ‘The Sail Loft’. This helped to ensure ownership and restoration of local facilities for the good of the community, by advancing education of the maritime and cultural heritage of the Northeast, through preserving traditional craft skills, musical traditions and historically significant artefacts and buildings.

Edinburgh Sculpture Workshop fitted out a new café space which has now been leased out to increase footfall and generate a new commercial income stream. The workshop supports artists in developing sustainable careers in the arts and contribute to making Scotland a desired destination for talented visual artists. They also aim to make art accessible for all individuals regardless of circumstances.

Dundee Gymnastics Club 2K using capital raised by SITR to finance a new lease, redecorate and purchase gymnastics equipment. The work of the club is central to encouraging young people from all backgrounds to participate in gymnastics and thereby advance health and well-being, education and employment in Dundee.

Nick Kuenssberg an active business angel and former SIS chair commented: “The introduction of SITR in 2014 was a critical and welcome move by the government recognising the importance of loan capital in the social enterprise space. By investing in the fund, investors, such as myself, had the opportunity to create a real, measurable, and sustainable impact on people’s lives. The demand for these monies has stimulated the raising of further funds that cater for both loan and equity capital, for example, SIS Ventures Impact First Fund, demonstrating the benefits to both social enterprise and start-up economic activity, a cause that I believe in passionately”.

Looking to the future

These examples are just a few of the projects and initiatives that have been made possible with SITR. With just over 12 months to go until the sunset clause expires, it is essential that we look to the future and ensure that the retirement of SITR does not see an end to tax reliefs for social impact investors. Big Society Capital are working with the Institute of Impact Investing, NPC, The Beacon Collaborative and Co-Efficient in highlighting the use of subsidies to provide concessionary capital to support the creation of impact.

Whilst SITR is perceived by some as less successful than was anticipated, using tax relief as a means of encouraging private investors into this space is still fundamentally important.

Tax reliefs including the Enterprise Investment Scheme (EIS) and Seed Investment Scheme (SEIS) have become a key tool for commercial organisations and SMEs to access capital – it is pertinent that an equivalent is available in the social investment ecosystem. With social enterprises proving that they can operate both as viable businesses and demonstrate valuable social impact, it is crucial that the sector works with government to ensure a suitable alternative to the sunset clause before its retirement in April 2023.

The clock is ticking when it comes to raising investment using SITR.

If you or your organisation feels strongly about the need for tax relief to enable impact investing we encourage you to be part of the conversation. Write to your local MP or get in touch to find out how you can be involved. For more information visit Get SITR.

Melanie Mills

Melanie Mills

Senior Director, Social Sector Engagement
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If you are a social enterprise, charity or membership network or infrastructure organisation and are looking for speakers, to partner on events, to share or receive case studies or are looking for support to navigate the social impact investment space.
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Tess Godley

Senior Policy and Strategy Manager TGodley@bigsocietycapital.com