EXCLUSIVE GUEST ARTICLE: Investing For Good - Impact Investing And New UK Tax Relief

Greg Moss Bond Dickinson Senior Wealth Advisor 19 May 2015


A new form of tax relief is designed, proponents hope, to drive what is known as impact investing in the UK, but how effective will it be and how should investors approach it?

The UK government has recently brought out another form of tax relief – Social impact tax relief, or SITR, which is designed to encourage what are called social enterprises to benefit from tax exemptions enjoyed by other, more conventional organisations. In this article, Greg Moss, a senior wealth advisor at Bond Dickinson, the law firm, looks at the changes. This publication welcomes reader responses and they can contact the editor at

Social impact tax relief (SITR) is a recent addition to the world of tax advantaged investments. It is effectively a spin-off of the enterprise investment scheme (EIS) rules, and allows social enterprises to benefit from similar tax incentives to those which have been available to commercial organisations under that scheme.

The similarities extend to the mechanisms and rates of tax relief. Tax relief is available to investors at a rate of 30 per cent, claimed through self-assessment.
One key difference between SITR and EIS relief is that the former is available on debt as well as equity investment, creating more flexibility for investee organisations and potentially more product choice for investors.

Who can benefit?
There are strict rules around which organisations can use the scheme to attract investment. They must be structured as either a registered charity, an industrial and provident society (IPS), a community benefit society, or a community interest company. As with the EIS regime, certain activities are excluded, principally:

-- Banking and insurance related activities;
-- Dealing in land, commodities and certain types of property investment;
-- Energy generation or exportation which qualifies for feed-in tariffs (FITs).

On the investor side, the rules are simpler and the relief is open to any individual paying tax in the UK, who invests directly or via a nominee arrangement.

Take up so far
It is fair to say that the regime, and the market it has created, are in their infancy. To date, just four deals have been announced.

There is reason to believe, however, that the marketplace will become busier during 2015. In particular:

-- The original legislation was only introduced in April 2014, and was initially very restrictive in terms of both the limits on SITR funding for investee organisations and the types of investment structure available;

-- Following a public consultation last year, funding per organisation will increase significantly, from £275,000 to £15 million, subject to EU state aid clearance;

-- The scheme is due to be expanded to include social investment venture capital trusts (VCTs), a form of collective investment, paving the way for a more diverse supply of products;

-- David Cameron’s re-election suggests that there will be a degree of political will behind the development of this market, tied as it is to the "Big Society" project, which Cameron has previously described as his “great passion”.



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