Charity taxation experts have expressed doubts about the benefits to charities of social investment tax relief.
SITR offers income tax relief of up to 30 per cent, or other tax breaks, to individual investors who invest in new shares or debentures in community interest companies, community benefit societies or charities.
While setting that 30 per cent rate, last month’s Budget confirmed that social enterprises would be able to receive up to €344,827 (£284,368) in investments over three years under the scheme.
The Budget document estimated that the scheme would cost the public purse £90m over the next five years.
John Hemming, chair of the Charity Tax Group, told delegates at the CTG’s annual conference in London yesterday that charities would find it difficult to make use of the scheme.
Since charities, with a very small number of exceptions, cannot issue shares, they would have to go down the route of debt investments such as debentures, meaning the scheme would not be a long-term option, he said.
Graham Dawes, a director of the accountancy firm Crowe Clark Whitehall, said: "It does seem to me that it’s a redundant relief for charities.
"I can’t help but wonder if a relief like this will simply encourage the more predatory investors to the charity sector to see what they can take out of it."
A conference delegate who did not identify herself said during the question-and-answer session that she thought SITR was a terrible scheme. "I think it’s a bad idea to continue tax relief to the rich," she said. "We’re encouraging debt; have we learnt nothing?"
Simon Rowell, strategy and market development director at the social investment wholesaler Big Society Capital, had earlier repeated his organisation’s claim that the relief could encourage £480m of investment over the next five years.
"The reason they’ve included debt is that most charities can’t raise share capital," Rowell said. He said that charities could not use social investment as "a substitute for grant capital or anything else".
Later in the day, Third Sector put these two concerns to Nicky Morgan, Financial Secretary to the Treasury.
Morgan said she had been aware of media speculation that SITR might divert giving away from other channels, but said she would see how it developed."I think if people are generous enough to give – and I mentioned the three-quarters of people who do give to charities every month – and there is any way we can encourage that, it is a good thing," she said.