Government wants views on the future of social investment tax relief

Demand for the measure has been significantly less than first anticipated and it is due to come to an end in 2021

The government is asking for evidence to help it decide whether to continue offering social investment tax relief.

SITR offers a 30 per cent tax break for investors who fund charities and social enterprises that meet certain criteria, such as having assets of less than £15m.

But demand for SITR has been substantially less than the government originally expected and it is due to come to an end in 2021.

A report published by the Social Investment Business in January said that, although the Treasury predicted there would be £83.3m of SITR deals in the first three years after its introduction in 2014, only £5.1m worth were agreed.

A call for evidence published by the Treasury this week says the government wants to understand why its use has been far lower than expected and says that in addition to investors and investees it would like to hear from social enterprises that could have used SITR but have not.

"The aim of this call for evidence is to enable the government to understand how the SITR has been used since its introduction in 2014, including levels of take-up and what impact it has had on social enterprises’ access to finance," the Treasury says in the call for evidence.

"The SITR has a sunset clause which will bring the scheme to an end in April 2021, and this call for evidence will help inform a decision about the future of the relief."

In a statement yesterday, the social investment wholesaler Big Society Capital said it would ask the government to loosen the restrictions on using the relief, which it says have been inhibiting take-up.

BSC also called for the removal of the limit that prevents organisations that are more than seven years old applying for SITR, as well as an increase in the £1.5m lifetime limit of investment that is eligible for relief.

Cliff Prior, chief executive of Big Society Capital, said SITR had "great potential" as a method of supporting social enterprises and charities.

"It is a vital measure to help tackle important social challenges that will save public money and improve the lives of people living in disadvantage," he said.

"Although take-up levels have been lower than first anticipated, we believe this can change providing the government makes amendments to the relief after feedback from the industry."

The call for evidence is open until 17 July. 

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