13 03 2017

UK To Enhance Social Investment Tax Relief Regime

The UK is to increase the lifetime investment limit for social enterprises to benefit from tax relief to GBP1.5m (USD1.82m) from the current three-year rolling limit of EUR344,000 (USD368,000).

The new limit will apply to social enterprise that receive their first investment within 7 years of their first commercial sale. According to the Budget document, the current limit will continue to apply to older social enterprises.

Other Social Investment Tax Relief (SITR) changes announced in the Budget include:

Reducing the limit on full-time equivalent employees to below 250 employees;
Excluding certain activities, including asset leasing and on-lending, to ensure the scheme is well targeted - investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future;
Excluding the use of money raised under the SITR to pay off existing loans;
Clarifying that individuals will be eligible to claim relief under the SITR only if they are independent from the social enterprise; and
Introducing a provision to exclude investments where arrangements are put in place with the main purpose of delivering a benefit to an individual or party connected to the social enterprise.
The changes, which were first announced at Autumn Statement 2016, will take effect for investments made on or after April 6, 2017.

Social Investment Tax Relief (SITR) was introduced in 2014 to encourage individuals to invest in certain social enterprises carrying out higher risk trading activities. Individual investors are eligible for a range of tax reliefs including income tax relief of 30 percent on their investment.

SITR is currently a de minimis state aid scheme and restricts the amount of investments a social enterprise may raise under the scheme over a three-year rolling period. The Government announced at Autumn Statement 2014 that the limit would be raised, subject to state aid approval.