Social Investment Tax Relief
As a result of EU rules on State Aid, there is a limit on the amount of Social Investment Tax Relief-eligible investment that a charity or social enterprise can receive.
The rules are set out in the Finance Act 2014, and depend on tax rates, the amount of State Aid received in the preceding three years (if any) and the exchange rate between pounds and Euros.
Figuring out if you have received State Aid is not always straightforward. It can include, for example, grants or below commercial-rate loans where the money has come directly or indirectly from public funds (e.g. from local authorities or Big Lottery Fund).
How much could we raise with Social Investment Tax Relief eligible opportunities?
Although we believe the calculator below to be correct, we make no warranty of this. In particular you should note that there is a dependence on exchange rates, which change all the time, and certain tax rates, which may change. Should you actually wish to rely on the amount, you or your advisors will need to perform the calculation independently.
Social Investment Tax Relief Calculator
Is it really that limited?
Although the amount of investment that can potentially be brought in under the Social Investment Tax Relief is relatively limited, the tax relief is designed so that this portion of the investment is the most risky investment. In practice, an organisation may choose to “layer” its investment offering – seeking a relatively small amount of investment under the Social Investment Tax Relief - which will bear the first loss in the event of a problem – and a larger amount of safer investment, more appropriate for risk averse institutions (for example, charitable trusts). The layering may become even more complex in practice with a grant element supporting the enterprise in some way, too.
An announcement in the March 2016 budget implied that these figures could go up by 16%, however it appears that the changes will not feed through to the SITR limit until 2019.
In addition, the government has applied for EU state aid clearance for an enlarged SITR scheme to raise the maximum eligible investment to £5m per year, and £15m in total. This application was made at the turn of the year 2014/2015, and it is in the hands of the European Commission to respond to it. Since the application was put in, we have repeatedly been told informally that a response was about six months away; most recently that a response is expected before the end of 2016. Although officially no delay is expected as a result of the Brexit referendum, the reality may be that this deprioritises the application for the European Commission, introducing a further delay. If and when the European Commission approves the enlargement, there will need to be a further Act to implement this, which will add a further delay.
Learn more about the Social Investment Tax Relief.