An estimated £3.4m has so far been invested across 30 organisations in deals that include social investment tax relief (SITR), a report published this week has revealed.
Produced by NPC in partnership with Big Society Capital, Social Investment Tax Relief: Two Years On looks at the SITR deals that have been completed, and the views of key stakeholders in that area.
SITR allows an investor to claim back 30 per cent of the value of an unsecured loan to charity against their tax bill. The relief, which was introduced by the government in 2014, is only open to individual investors.
The report also revealed that on average these investments have raised capital of £100,000 for charitable causes, including in areas such as education, homelessness, heritage work and in local communities.
It also found that the average cost of capital is 4.8 per cent per annum over a five year period, with deals taking around four months to complete.
About 80 per cent of deals to date have been loans, with the rest community shares or social impact bonds (SIBs). The average size of investment by an investor is around £20,000, but has been as low as £230 in community share offers.
Investors, both in funds and investing directly in enterprises, have so far been a mix of high-net-worth individuals and angel investors, sourced through the fund managers’ existing networks.
A third of all SITR activity has focused on Scotland, with a fifth focusing on the South West. London has seen very little impact from SITR. While, on average, organisations who are considering SITR have less than 10 employees and a revenue of around £580,000.
SITR is 'working'
Simon Rowell, interim head of strategy and market development at Big Society Capital, said: “The evidence is in - social investment tax relief is working. It’s encouraging to find that smaller charities and social enterprises have been able to navigate the tax relief rules and are already finding SITR to be a useful new tool to help them grow.
“The affordability of SITR products is highly promising. There are now big opportunities for investors to follow the early leaders and use their investment account to support charities social enterprises they believe in. Social investment tax relief is now open for business.”
The report notes that there are two common barriers to raising SITR investment that need to be addressed. These are not having the expertise required to either develop appropriate business plans or prepare financial documents, and not knowing how to find investors.
Abi Rotheroe, NPC’s lead on social investment work and co-author of the new report, said: "Tax relief for social investment has freed up some much-needed money in the last two years. An extra £3m for good causes is welcome news when charity finances are under so much pressure."
Related articles
