- 5 July 2019

Tax reliefs are a vital government initiative to encourage investment into smaller companies that can deliver innovation and choice into our economy.

Whilst the latest HMRC statistics are underwhelming, we see great potential for SITR as an enabler to grow social enterprises and charities.

HMRC issued its 2016-17 update on the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR) at the end of May.

SITR, the youngest of these reliefs, was introduced in April 2014 to allow investors subscribing to qualifying shares or debt investments in SITR-eligible social enterprises to claim 30% of the amount invested off their income tax. Big Society Capital sees significant potential in SITR as a tool for raising finance for social-sector organisations to grow their trading activities and scale their impact. Organisations eligible to use SITR include: registered charities, Community Interest Companies (CICs) and Community Benefit Societies (CBSs).


Policy uncertainty undermines growth

HMRC’s latest reporting update marked the first time that the number of companies raising funds and the amounts raised decreased across all three reliefs. One significant factor behind this is likely to be Brexit uncertainty, reducing activity in the short-term as both investors and investees delay decisions awaiting clarity on the unfolding political and macroeconomic landscape, so not really that surprising!

We believe policy uncertainty in the case of SITR may have compounded this further, curbing momentum in the number and value of completed deals. In the government’s 2016 Autumn Statement a higher SITR cap of £1.5M was announced to extend the relief’s reach to larger organisations, from the original cap of £290k. Unfortunately other political priorities delayed the passage of this legislation by a year, finally taking effect in November 2017 (see our guide to the changes to the rules in 2017). But there is positive news too.

Our Power, a not-for-profit energy supplier, was the first organisation to utilise the higher limit raising the full £1.5 million allowed at the end of 2017 and we hope this is just one early indicator of SITR’s continued importance and potential as a tool to help such organisations grow and sustain themselves.


A tool for the many

As part of GET SITR, our awareness campaign delivered on behalf of the Government Inclusive Economy Unit (GIEU) we did a market sizing piece of work to estimate the number of organisations eligible for the relief.

Organisation Type Sector total Estimated SITR market total Existing SITR threshold New SITR threshold
Charities 167,443 31,930 30,455 1,475
CICs 111,922 2,481 2,367 114
CBSs 465 74 68 6
All 179,830 34,485 32,890 1,595

Estimate above from March 2018


Using latest GOV.UK and NCVO Almanac data we think that over 30,000 organisations might be able to benefit from SITR. To date only around 60 deals have been completed, meaning there is vast untapped potential and there remains much work to spread awareness through the campaign and our campaign partners.

If you still aren’t sure what or how SITR works then take just two minutes to watch our new video below, which should help.


SITR Open-source database

An important enabler of our campaign is to share the learnings of organisations who have raised SITR with their peers. A shortcoming of the HMRC reported information is that it is both latent (May-18 reporting covers activity up to April-17) and high-level. A richer picture of SITR deal data by investment amount, sector, organisation age and size will allow better market insight and more comparable case studies for a given organisation assessing the case for investment using the relief. We are yet to find an information source that provides a detailed and informed view of SITR investment activity.

This is why we have developed an open-source SITR database, (similar to our broader Deal-level dataset on all social investment deals) where we hope SITR participants can collaborate to bring a better shared understanding. If your organisation has participated or advised on an SITR deal we would really value your help on this project, please get in touch for further information.

So watch this space, SITR has so much more to offer and we are committed to helping more social enterprises, charities and investors to discover why.