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Social tax relief limit set to increase to £5million

Dan Hird, head of corporate finance, looks at what this means for the social investment sector

04-12-2014 | In his Autumn statement, the chancellor George Osborne announced that the Government will be seeking approval from the EU for a significant increase to the size of investments that are eligible under Social Investment Tax Relief (SITR) to £5million per organization per year, from its previous limit of approximately £290,000 over three years.

Dan Hird, head of corporate finance at Triodos Bank - currently working on one of the first deals to use SITR in conjunction with a social impact bond - welcomes the news. He says raising the profile and the limit of SITR will provide a significant boost to the social investment sector. 

"Charities and investors have been lobbying for a bigger incentive to drive more investment into social enterprise, and this announcement for an increase to SITR limits is a very welcome move.

dan hird

"This move will put SITR at the same level as EIS, and I think that will make it a much more attractive proposition"

Dan Hird, Head of Corporate Finance at Triodos Bank

"SITR is a relatively new relief launched in 2014, and so doesn’t have much of a track record yet partly due to its low profile, and partly due to the £290,000 State Aid limit. Investors, including wealth managers and IFAs are already well aware of the benefits of Enterprise Investment Schemes (EIS), a similar tax relief, and £billions have already being invested in private companies in recent years through EIS.

"This move will put SITR at the same level as EIS – i.e. 30% tax relief for the investor and a £5million investment limit for the issuer – and I think that will make it a much more attractive proposition.

"Due to certain limits around gross assets and number of employees, large charities may not be able to use SITR, but as larger organisations are more stable and potentially less risky, investors may be prepared to invest without the extra incentive. Smaller and medium sized charities however really do need this type of tax incentive and I think, it will encourage more private investment into the social sector.

"The next pressing challenge is - where are the deals going to come from? Social sector deals typically take a while to put together, and there lies the challenge for intermediaries like us - I don’t see a sudden rash of deals completing in the next 12 months, but instead this new relief will have an impact over the medium term as the social investment sector continues to mature.

"Overall, this is undoubtedly very positive news and so I hope the EU does grant approval for this change."

Notes to editors

For further information, comment or case studies, please contact:

Will Ferguson

william.ferguson@triodos.co.uk 0117 980 9770

Faye Holst

faye.holst@triodos.co.uk 0117 980 9584

Rachel Mason

rachel.mason@triodos.co.uk 0117 980 9710

About Triodos Bank NV
Triodos Bank only finances enterprises which create social, environmental or cultural added value. Key sectors include organic food and farming, renewable energy, social housing, and fair trade. Transparency is a core value and Triodos publishes details of every business it lends to. A range of personal savings accounts is offered, and full banking services are available for businesses and charities. Triodos Bank is an independent bank founded in the Netherlands in 1980. Its principles and independence are protected through a special shareholding trust. The UK office opened in 1995 and is based in Bristol.
Triodos Bank offers a range of personal savings accounts as well as other investment opportunities.

About Triodos Corporate Finance
Triodos is one of the world's leading sustainable banks. Its advisory arm, Triodos Corporate Finance, works exclusively with sustainable businesses and has a long track record of advising businesses on raising capital through private placements and retail offers. Over the past 3 years, Triodos Corporate Finance has raised over £45 million for businesses within the sustainability sector with investments from institutions, charitable foundations, private high net worth individuals and retail investors. www.triodos.co.uk


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