SOCIAL ENTERPRISE NEWS
I didn’t want to put any reader off by mentioning tax in the opening title to this blog, as under normal circumstances that would probably curtail my further reading fairly swiftly.
However, if you are a social enterprise or charity looking to raise investment now or over the next two years, then all the statistics and common sense tell us that what you and your organisation want is access to:
So, if all those are a big tick then Social Investment Tax Relief (SITR) is something you need to know about.
SITR exists to support social enterprises (CICs, BenComms & Charities) to raise risk finance. The tax relief allows investors to claim a 30% tax relief on their investment and they must maintain their lending for a minimum of three years (although it can be more).
It is issued to off-set the investor’s risk (if things go wrong the investor will be at the bottom of the pile to receive and repayment of capital) and using the tax relief can help to secure favourable interest rates.
SITR has the added benefit of being available to raise both debt and equity finance.
So why haven’t you heard about it? Scotland has seen around 20% of the deals using SITR raising around about £3 million pounds of investment. There are some great examples of organisations that perhaps don’t fit the traditional perceptions of what is socially investable:
Portpatrick Harbour: the historic harbour of Portpatrick was in financial difficulty and under threat of being lost to a property developer. Money was raised by the local community to save and refurbish the harbour and its facilities.
Freedom Bakery: raised investment using SITR to their expand their prison-based social enterprise in Glasgow. The bakery trains prisoners at HMP Low Moss to make artisan bread and aims to increase the employability of prisoners and reduce re-offending.
Why has more money not been raised? The tax is a bit tricky, and some trading activity isn’t eligible (such as property development, being a landlord or leasing) which does restrict its use.
The UK Government recently extended SITR for a further two years and we are keen to see the tax relief extended and expanded so that more social enterprises can take advantage of it. You can read more about our SAVE SITR campaign here.
How do I find out more? Well, that’s a really easy question. Our GET SITR website is dedicated to telling you everything you need to know if you are thinking about using SITR to raise investment.
You will find case studies from social enterprises that have used SITR and their impact and editable free templates that you can use when applying for pre-assurance.
Pre-assurance is a helpful step to take to be sure your investors will qualify for the tax relief. There are simple answers to some of the complex questions which have been asked by the early pioneers of SITR which are helpful to those interested in using the tax relief.
Social Investment Tax Relief is one more option in the range of resources and support available to social enterprises and charities across Scotland who are looking to grow their impact and need capital to achieve it.
So, next time you think I need to raise patient and affordable capital, it’s important you know whether social investment could be the answer.
Melanie Mills, Big Society Capital
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