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Social Investment Tax Relief

By Kevin Russell | 6 April 2015

Social Investment Tax Relief (‘SITR’) is a new tax relief that enables qualifying investment in a social enterprise (including a charity) to benefit from tax relief:

 

  • 30% relief against income tax in the tax year of investment or the previous tax year;
  • Deferral of capital gains tax, where gains in the year of investment are reinvested into a social investment. The deferred tax is payable when the social investment is sold or redeemed;
  • No capital gains tax is payable on sale or gift of the SITR qualifying investment itself, if held for at least 3 years.

 

So far so good. But the Scheme as initially launched was quite limited as a result of European Union (‘EU’) rules limiting State Aid. A social enterprise is only permitted to receive investment under the scheme totalling €344,827 Euros and individual investors can are limited to total SITR investments of  £1 million. The costs of setting up and launching a scheme mean that the scheme is unlikely to be of widespread appeal at the moment.

 

The Government is therefore seeking EU approval to increase the investment limit to £5 million per annum per organisation, up to a maximum of £15 million per organisation, and to extend the relief to small-scale community farms and horticultural activities. The Government also wishes to extend the SITR scheme to indirect investment through a Social Venture Capital Trust. It remains to be seen if a post election Government picks up the mantle on this.

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 

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