The government has asked charities to respond to its call for evidence on the use of the social investment tax relief (SITR).
SITR allows an investor to claim back 30 per cent of the value of an unsecured loan to an eligible charity against their tax bill. The relief, which was introduced by the government in 2014, is only open to individual investors.
The government will consult until 17 July on investors' and investees’ experience of SITR so far, and welcomes suggestions for improvements.
Big Society Capital said its main request would be for current restrictions around the tax relief to be relaxed, as it says these have been “inhibiting take-up”.
It urged for the limit on organisations older than seven years applying for SITR to be reviewed, as it said this “is not relevant” for the smaller organisations like charities that benefit from the relief.
And it called for an increase in the maximum amount of investment eligible for relief, currently £1.5m, to be considered by the government, as it says this would “take account of larger enterprises with greater social impact”.
Cliff Prior, chief executive, said: “We will be speaking with social enterprises and other organisations to ensure as many views as possible are presented to the government. We look forward to responding to the government’s consultation, and working together to make the SITR process simpler and more accessible.”
Disappointing take-up
HM Treasury predicted that SITR would be used to support £83.3m-worth of investment in its first three years, but the actual figure was £5.1m.
Big Society Capital has admitted this is “lower than expected” but said that according to its open source data, the total is now up to £9.2m and that this would increase if its reforms were put in place.
Prior said: “Although take-up levels have been lower than first anticipated, we believe this can change providing the government makes amendments to the relief following feedback from the industry.
“Our belief is backed by a 2018 Europe-wide study, which ranked SITR as the fourth most effective tax incentive for promoting investment into SMEs and start-ups.”
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