From April 2014 a new investment relief has been created, the Social Investment Tax Relief (SITR). Investments must be in a social enterprise, which means a community interest company, a community benefit society, or a charity. The money raised must be used for the enterprise’s chosen trade or charitable purpose.
In many ways SITR shares characteristics with the SEIS (Seed Enterprise Investment Scheme) and the EIS (Enterprise Investment Scheme). There are, however, some differences in the Income Tax, Capital Gains Tax and investment limits for each scheme.
Another important distinction is that SITR is the only scheme that can apply to certain debt instruments as well as shares.
A summary of the present tax reliefs available under the three schemes are set out below:
Income Tax
SITR – 30%, SEIS – 50%, and EIS -30%.
Capital Gains Tax
All three schemes provide potential CGT free gains on the growth in investments, if achieved, provided they are held for the minimum holding period.
Additionally, gains on the disposal of any asset can be deferred into SITR and EIS (but not SEIS) investments.
In place of the full deferral relief, investors in SEIS can claim a 50% exemption of the gains reinvested.
At present the maximum amount that an individual can invest in SITR investments is £1m annually. The equivalent maximum amounts for SEIS are £100,000, and EIS £1m.
Further, the maximum amounts that the entity can raise are: SITR Euros 200,000 over 3 years (including any other de minimis state aid received), SEIS £150,000 over 3 years, and EIS £5m in any 12 month period.
Investors considering their investment options should seek professional advice as it may not be immediately clear which would be the best scheme to support their investment needs.