British government encourages more social investment via SITR

Social enterprises looking for encouragement from the UK chancellor Philip Hammond's Autumn Statement were offered slim pickings. 

This was the chancellor's first big chance to outline the government's financial priorities under the prime minister Theresa May, who took office in July 2016. The major announcement to affect social ventures was the increase in the investment limit that organisations can accept when using social investment tax relief (SITR).

From April next year, the amount of money social enterprises can raise through SITR will increase to £1.5m. The current ceiling is about £250,000 (or €344,827 under EU rules) over three years. The government has also promised a review of SITR by 2019.

Social investment wholesaler Big Society Capital (BSC) welcomed the news but urged the government to do more. Simon Rowell, senior director of strategy and market development at BSC, said: "SITR still needs to be put on a level playing field with other private tax relief schemes, such as EIS and VCT.

"Therefore, we implore the chancellor to consider how the government should be further supporting investment into the social sector to encourage innovation and growth, but also to reach more people in need.”

Like SITR, the government's Enterprise Investment Scheme (EIS) allows investors to claim back 30% of their investment against their income tax payment but also offers further tax incentives on the profits or losses from such investments.

Venture capital trusts (VCTs) drive private equity capital towards small expanding businesses and offer similar tax breaks to EIS, but also offer exemptions from income tax on dividends from shares.

Community businesses to get a boost?

Aside from SITR, rural rate relief was increased to 100%, meaning businesses in rural areas with a population of 3,000 will pay no business rates on shops or offices.

The rural rate relief could be good news for community owned businesses. Jenny Samson, programmes manager at Power to Change, which supports community businesses, said: "Community businesses can thrive anywhere, but they are especially vital in rural areas which are in danger of being cut off if services disappear completely.

"Pubs and shops are a social lifeline for some communities, so rate relief targeted at precisely these last shops in rural areas could be extremely helpful. Some may already benefit under existing rules, but if the government has found a way to encourage more people to consider this option then whole communities will benefit."