The chief executive officer (CEO) of social impact asset manager Resonance is calling on advisers and their clients to lobby Parliament to extend Social Investment Tax Relief (SITR)
The relief, similar is many ways to EIS, was introduced in 2014 for an initial seven-year period after which it would be reviewed.
Although the funds raised have been valuable to many small local social enterprises around the UK there has not been a vast take-up amongst private investors despite the attractive tax reliefs.
CEO Daniel Brewer (pictured) said SITR has helped “protect a vital support scheme for social enterprises and charities that are working hard to improve vulnerable people’s lives in our communities across the country. This support is particularly urgent now as social enterprises are playing an important role in our country’s recovery from the covid-19 pandemic.”
In an open letter encouraging advisers and investors to write their local MPs Brewer wrote: “Unfortunately, due to a sunset clause in the legislation, SITR will be retired by April 2021 unless action is taken now to extend it. There is an opportunity to extend the tax relief through an amendment in the Finance Bill currently passing through Parliament. I therefore wanted to ask if you would write to your MP to ask them to support, such an amendment which would extend Social Investment Tax Relief’s end date from April 2021 to April 2023.”
Resonance was founded in 2002 and has around £210m in assets under management across a range of regional and property funds Its Resonance Homeless Property Fund, which supports social enterprises dealing with housing shortages, is its largest fund at £195m.
Last year Resonance invested £34m raised from 237 investors into 33 social enterprises with groups such as Rathbones Greenbank Investments, UBS and several IFA firms such as Paradigm Norton among its supporters.
Brewer concluded in the letter: “This would be particularly detrimental at a time when social enterprises and charities are on the frontline, with staff and volunteers risking their own lives to help others through the covid-19 pandemic – and for a government that is looking to demonstrate its commitment to ‘levelling up’ for disadvantaged communities.”
SITR currently has many of the same basic tax reliefs as EIS. Income tax relief at 30% with carry back, CGT deferral and loss relief against income and IHT exemption.
An individual investor can invest up to £1m per tax year, which can be on top of the £1m EIS amount, or £2m into a knowledge-intensive EIS business, making it a useful financial planning tool for high net worth individuals.
Despite the appeal of the tax breaks the relief has been taken up quite modestly by individual investors in comparison with EIS, SEIS and VCTs which is why social impact investment groups fear the SITR will be ended at the end of the current tax year.
Resonance’s 12 investment funds focus on tackling major societal issues, with particular expertise in homelessness, poverty, community-led projects, health & wellbeing and education.