InvestmentsJun 12 2020

Govt urged to extend social tax relief

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Govt urged to extend social tax relief
ByImogen Tew

The government has been urged to extend the social impact tax relief scheme to help increase the amount invested in social enterprises in the wake of the coronavirus crisis.

A consortium of financial institutions is encouraging MPs and the Treasury to extend the scheme as part of an amendment to the Financial Bill currently passing through parliament.

Investors in the SITR scheme receive a tax break of 30 per cent on the funds invested in qualifying social enterprises. The scheme is designed to encourage individuals to direct private capital into disadvantaged areas.

But the scheme is set to shut from next April. The government had planned to complete a review of its impact to assess whether to extend the scheme last year, but due to the December general election and now the coronavirus crisis, the consultation has been shelved.

Campaigners for the scheme are concerned that without timely intervention, the government will close the scheme from April 2021.

They say investors are holding off investing through the scheme until the government makes a firm decision on the tax relief, but the government is looking at the lack of investment as a reason to close the scheme’s doors.

Daniel Brewer, chief executive of Resonance, said: “This support is particularly urgent now as social enterprises are playing an important role in our country’s recovery from the Covid-19 pandemic.  

“SITR has enabled many outstanding and crucial social enterprises to access the investment they need to grow on an unsecured and affordable basis.”

Resonance runs enterprise growth funds for wealth managers and advisers with high-net worth clients who wish to mitigate their income tax while investing in social enterprises.

The firm currently has three funds based on regions — Resonance South West SITR fund, Resonance West Midlands SITR fund and Resonance North West SITR fund.

Mr Brewer told FTAdviser the company felt “hamstrung” by the government’s refusal to extend the scheme. 

Resonance, along with Big Society Capital and Social Enterprises UK, has proposed a two-year extension to the scheme to allow time to “reflect and make necessary changes” needed to support future policy.

The group has written to Jesse Norman, financial secretary to the Treasury, with support from 33 social investors and third sector support organisations.

Melanie Mills, senior director at Big Society Capital, said: “The very social fabric of our country is being tested by Covid-19 and social enterprises are on the frontline responding to the crisis, including supporting the most vulnerable in communities by delivering food and medicine and tackling domestic violence. 

“They will also be on the frontline of making things better in the aftermath.”