Potential hammer blow for social enterprises and disadvantaged communities

Social enterprises and social investors are urging the Government to not backtrack on its promise to ‘level up’ the UK’s cities and regions by scrapping Social Investment Tax Relief (SITR), which has a proven record of unlocking and directing private capital into some of the most disadvantaged places in the country.

They are now encouraging MPs to get behind their bid to increase accessibility to SITR Investment for a further two years as part of an amendment to the Financial Bill that is currently passing through parliament.

Harriet Baldwin, Liam Byrne and Pat McFadden have all shown their support, whilst Gavin Williamson, Jane Stevenson, Mark Pritchard, Preet Kaur Gill and Sajid Javid have been asked to get behind the rallying call.

SITR has already leveraged at least £1 million in private investment to help 11 social enterprises deliver essential services locally.

This ranges from Birmingham’s Jericho Foundation (an upcycling venture that provides jobs and training for people with personal or occupational barriers to employment) to the Wellington Orbit, which has brought a disused building back to life as a vital community hub, retail space, cafe and cinema.

It is the only tax break specifically aimed at social enterprises and is designed to encourage individuals to support the sector by helping them access new sources of repayable finance, with backers receiving a 30 per cent tax break when investing into an eligible organisation.

Melanie Mills, senior director social sector engagement at Big Society Capital, said: “The very social fabric of our country is being tested by Covid-19 and social enterprises are on the frontline responding to the crisis, including supporting the most vulnerable in communities by delivering food and medicine and tackling domestic violence. They will also be on the frontline of making things better in the aftermath.

“Now is not the time to be taking away a tax relief scheme that has been proven to attract significant investment into the most disadvantaged places and causes in the West Midlands and this is why we urge MPs to act quickly to prevent the closure of what is a valuable lifeline for the sector, saving potentially hundreds of jobs and key community services in the process.

“The Conservative Government introduced the relief in 2014 and, due to the election in December 2019 and the sudden onset of the pandemic, has not been able to complete a review of its impact, which means it could come to an end in April 2021 without timely intervention.

“What we are proposing is a modest two-year extension to allow time to reflect and make any necessary changes needed to support future policy on directing private money to disadvantaged places and causes.”

Big Society Capital has been running the GET SITR campaign for the last 18 months, in order to help raise awareness of what Social Investment Tax Relief is and how social enterprises, charities and investors can access it.

This has created an army of investors, who care about a social issue or are passionate about a local area and want to gain much more than a financial return. In some instances, they are offering their skills, volunteer time and networks.

In turn, there has also been a sharp upturn in the number of community groups, charities and social enterprises that are taking advantage of this new form of finance – in fact SITR has the potential to generate at least £300 million in investment over the next seven years if reformed.

Melanie added: “By removing a tax relief that benefits the poorest and most vulnerable without any replacement would be damaging and inadvertently sends a message that ‘levelling up doesn’t matter’ at a time when social enterprises and charities are on the frontline, with staff and volunteers risking their own lives to help others."

Big Society Capital has today sent a letter to Jesse Norman MP urging him to extend SITR and this has been signed by 33 of the UK’s leading social investors and third sector support organisations.