Social investment tax relief has fallen well short of the government’s targets and is not fit for purpose, according to a new report published by the Social Investment Business.
The What a Relief report, which was written by David Floyd, managing director of the research and project development community interest company Social Spider, says 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.
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.
The report highlights five key challenges for SITR, one of which is a lack of awareness among charities and social enterprises.
It says that since 2014 only 345 charities and social enterprises have applied for advance assurance for SITR, and only 63 have actually used the relief.
The slow pace of legislative change is also cited in the report, which says that more SITR deals would have been agreed if the investment limit on SITR was raised earlier.
The previous £300,000 limit on the amount of investment available for SITR was raised to £1.5m in April 2017, but came into effect only in November that year.
The report says that SITR is "not fit for purpose" because it fails to meet the needs of charities and social enterprises, and many charities and social enterprises have had negative experiences during the application process.
A mismatch between supply and demand for SITR deals is also mentioned in the report.
A Treasury spokesman said: "We want to support investment in social enterprises, which is why we introduced SITR.
"As announced at the Budget, we will shortly launch a review of the relief, examining levels of take-up, design and targeting."