SITR has seen little take-up from the bodies it was designed to assist which means this potentially important tax relief needs a governmental review now.
Anecdotal evidence suggest around £2m was invested last tax year (2017-18), while the official amount for 2016-17 is 25 social enterprises received investment and £1.8m of funds were raised. Nothing to crow about, then.
Since SITR was launched, to end of 2016-17 tax year, only 50 social enterprises have raised funds of £5.1m through the scheme.
Clearly this is disappointing for everyone involved in the social investment sector, at a time of spiralling interest from investors for social impact investment.
Currently investors don’t have many options for tax-efficient social investment. There is, of course, Gift Aid but that is donating, not investing. And the feedback from investors is they like the fact SITR enables them to generate a modest financial return and a high social return.
So demand from investors is not the problem – it is simply a supply issue and the government should look to loosen the restrictions on SITR to ensure more UK venture capital scheme capital brings social, as well as financial, return.
Admittedly, following recent EIS and VCT rules changes, more capital will be invested into growth businesses, boosting UK Plc and creating jobs which is, vicariously, a certain level of social return.
But you can’t argue that capital is helping vulnerable groups and it would be great to have one of the UK venture capital schemes delivering measurable social return outcomes to round off the positivity around these schemes.
What can be done to fix SITR?
SITR has substantial potential as a tool to offer enterprises and charities access to affordable social investment.
However, it is the restrictions around accessibility of SITR which have hampered the ability for enterprises to make use of it.
Interestingly, one SITR fund has changed the structure of its second fund to an EIS and SITR fund to give itself greater flexibility to deploy capital.
The critical failure of the SITR market is the fact that organisations who would benefit from it are deemed ineligible due to the restrictions of the legislation, particularly those changes introduced in the 2016 Autumn Statement.
Some urgent and vital changes that might be suggested are these:
