The voluntary sector is starting to shift from grants to social investment, but reforms are needed to make social investment tax relief more accessible, according to Richard Beard, chief executive of the employment social enterprise the Jericho Foundation.
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.
Speaking at a Philanthropy Impact event on SITR yesterday, Beard said he thought charities were beginning to realise dependence on grants was less attractive than other ways of generating income.
He said: "I’ve definitely noticed a major mind shift, a cultural shift, among my colleagues in the third sector in the last few years. They’re recognising that grant dependence and handout dependence are not the future; the future is coming up with sustainable models that will ultimately allow enduring social impact to be delivered without the need to keep going back to people for more and more grants."
Beard praised SITR, declaring it the "best thing to come out of Westminster in the past 10 years", but said changes were needed to make it more accessible, specifically an increase in the current €340,000 (£290,000) cap on investments into a single organisation.
He said: "Being a more mature organisation, we are stuck with the €340,000 cap. That isn’t a problem for us at the moment, but I think it will become one in the future."
He said finding investors could be difficult because of the regulatory environment around SITR. Although the foundation had "a fantastic scheme", he said, it couldn’t sell it to investors.
Beard said there should be mechanisms to support smaller investments and he would like to see SITR used for property development.
Cliff Prior, chief executive of the social wholesaler Big Society Capital, said at the event that he would like to see SITR opened to the general public through crowdfunding platforms.
But he warned there were some concerns that the advanced assurance scheme for SITR – which allows investors to check whether their proposals are SITR-compliant before they begin – would not continue in the new tax year.
Lyn Tomlinson, chartered financial planner at the financial services firm Cazenove Capital Management, told the event that investors in SITR projects should be prepared to wait between six and 10 years for a return on investment
"You need somebody who is prepared to be a bit patient, grow the market and take a few risks," she said.