Tax Relief for Social Investors Generates £3m for Good Causes

A new report from think-tank NPC and Big Society Capital says £3.4 million has been provided to charities and social enterprises thanks to two years of Social Investment Tax Relief (SITR).

South Bristol Sports Centre is one of the most recent social enterprises to benefit from the tax break, having received £250,000 from the Resonance Bristol SITR Fund. The centre works with young people in one of the most deprived areas in Bristol and is using the investment to finance the construction of six five-a-side football pitches.

Ben Ferris, Director of South Bristol Sports Centre said:

“We engage young people via their passion for sports to help increase their confidence, skills and aspirations. The investment from the SITR Fund is supporting our growth and has provided a great opportunity to increase our provision for the local community.”

NPC’s paper published on Monday 4 July, found:

• 30 projects have raised investment using SITR deals since April 2014.
• On average these investments have raised capital of £100,000 for charitable causes, including in education, homelessness, heritage work and work in local communities.
• The market has predominantly boosted organisations outside of London. Activity has focused on Scotland (a third of all projects) and the south west (one in five).
• Over 170 investors have invested into SITR deals, significantly high net-worth individuals and angels.
• An increasing number of retail investors — often members of the local community via community shares — are using SITR with the average investment size as low as £230.
• NPC found that SITR has predominantly helped organisations with revenues under £500,000 a year.

Simon Rowell, Interim Head of Strategy and Market Development at Big Society Capital said:

The evidence is in – Social Investment Tax Relief is working.

“It’s encouraging to find that smaller charities and social enterprises have been able to navigate the tax relief rules and are already finding SITR to be a useful new tool to help them grow.

“The affordability of SITR products is highly promising. There are now big opportunities for investors to follow the early leaders and use their investment account to support charities social enterprises they believe in. Social Investment Tax Relief is now open for business.”

SITR is a relatively new tax break which offers individual investors 30% income tax relief on loans or equity investments made to charities and social enterprises. Big Society Capital has championed the SITR market through its GET IT campaign, and NPC’s paper is the first attempt to estimate the size and impact of that market.

Abi Rotheroe, NPC’s lead on social investment work and co-author of the new report, said:

“Tax relief for social investment has freed up some much-needed money in the last two years. An extra £3m for good causes is welcome news when charity finances are under so much pressure.

“So far, the relief has had an impact beyond the usual places. Investment has taken off especially in Scotland and the South West, a welcome indication that we can unlock big philanthropy without leaving the regions behind.”

The report highlights that future support for the further development of SITR will need to take into account two key barriers for charities and social enterprises: not having the expertise required to develop appropriate business plans and not knowing how to find investors.

Resources such as the DIY SITR guide from Matt Fountain, Founder of social enterprise The Freedom Bakery, offer advice and tips to help address these obstacles.

Charities and social enterprises can find out more about Social Investment Tax Relief and the GET IT campaign at www.bigsocietycapital.com/social-investment-tax-relief.