Social Investment Tax Relief (SITR) is a tax relief which investors can claim in respect of investments which they’ve made in social enterprises.
It offers investors a reclaim of up to 30% on their income tax liability so it is a great incentive to attract investors to your business./blog/sitr-who-can-invest
So how do you know if your business qualifies as an approved SITR business?
Before you think about obtaining approval there are a number of criteria which your enterprise must meet.
Firstly and foremost is the structure of your business. It must be classed as a commercial business that helps people or communities, and must be structured in one or more of the following ways:
• a community interest company,
• a community benefit society,
• a charity - which can be a company or a trust.
Note that this structure must remain during the whole of the qualifying period (3 years).
This tax relief is in place to aid smaller businesses so there are restrictions on the size of your enterprise. Your business must have:
• fewer than 500 full-time equivalent (FTE) employees
• not more than £15 million in gross assets immediately before the investment
• not more than £16 million in gross assets immediately after the investment
What type of business meets the criteria? The good news here is that most businesses qualify, but there are a number which are specifically excluded. These are:
• dealing in land, in commodities or futures, or other financial instruments,
• banking, insurance, money-lending, debt-factoring, or other financial activities,
• property development,
• activities in the fishery and aquaculture sector that are covered by Council Regulation (EC) No 104/2000 of 17 December 1999,
• the primary production of products listed in Annex I to the Treaty on the Functioning of the European Union (agricultural etc products)*,
• generating or exporting electricity which will attract a Feed-in Tariff *,
• road freight transport for hire or reward,
• providing services to another person where that person's trade consists, to a substantial extent, of excluded activities, and the person controlling that trade also controls the company providing the services.
* Note that the government has sought approval to widen the SITR scheme, with plans to remove renewable assets attracting a feed in tariff and community agriculture from the excluded list.
As with all other tax schemes there are restrictions based on ‘related parties’. From the date of investment, and during the whole of the qualifying period, your business must not:
• be controlled by another company, or by another company and a person connected with that other company; • have arrangements in place for it to be controlled by another company or by another company and a person connected with that company;
• be a member of a partnership (the same restriction applies to its 90% social subsidiaries);
• control another company that isn't a qualifying subsidiary, and there must be no arrangements in place that would allow that to happen.
What does 'connected' mean in this context? A company is connected with another company if the same person has control of both companies, and control is measured over the following:
• Control over the affairs of the company
• Control through voting power
• Control through share capital or through issued share capital
• Control over income of the company
• Control over assets of the company
So if you think that your business could benefit from SITR investment and you would like our help please contact us at Sapphire Capital Partners LLP. We are happy to help.
Written by Violet Spence
As a manager at Sapphire Capital Partners LLP, Violet spends her days assisting clients with SITR, SEIS and EIS schemes for companies and applying to HMRC for advance assurance on behalf of clients. Contact her by email at Violet@sapphirecapitalpartners.co.uk
For further information and advice on the Social Enterprise Tax Relief, Seed EIS or EIS, please contact Sapphire Capital Partners LLP at the following:
Office phone: 08 707 348 912.
Email address: email@example.com