Enlarging Social Investment Tax Relief

Many social enterprises currently have difficulty raising capital from investors and commercial lenders.

HMRC has announced that legislation will be introduced in Finance Bill 2017 to introduce an enlarged Social Investment Tax Relief (SITR) scheme. The scheme will be based on the current SITR scheme subject to the following changes:

  • the amount of investment a social enterprise may receive under the SITR over its lifetime will be increased to £1.5 million. Increasing the investment limit will allow social enterprises to raise more investment through SITR, making it attractive to a wider range of enterprises and investors. Excluding lower risk activities will ensure the scheme is well targeted and delivers value for money.
  • social enterprises must raise their first investment under the SITR or other risk finance investment (including the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) or Venture Capital Trusts) no later than 7 years after making their first commercial sale
  • individuals will not be eligible to invest in a social enterprise under the SITR unless any other investments made by the individual in the social enterprise, including loans, were made under the SITR or other risk finance investment
  • social enterprises will not be able to use money raised under the SITR to replace an existing loan
  • the maximum number of full time equivalent employees a qualifying social enterprise may have will be reduced to fewer than 250 employees
  • the list of excluded activities will be extended to exclude:
    • all energy generation activities
    • leasing (including letting ships on charter or other assets on hire)
    • providing banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial services to social enterprises
    • operating or managing nursing homes or residential care homes, or managing property used as a nursing home or residential care home
  • anti-abuse provisions similar to the disqualifying arrangements requirements in the EIS and SEIS rules will introduced
  • provision will be made to introduce an accredited scheme for affordable social care through regulations at a later date

This measure is designed to align with EU state aid rules.

Some social enterprises that qualified under the current scheme will no longer qualify for SITR as a result of changes to the list of excluded activities and reduction in the maximum number of full time equivalent employees. A small number of older social enterprises that would otherwise have been excluded from receiving investments under the enlarged SITR will continue to be able to access investments under the amended de minimis scheme.


SITR was introduced as a de minimis state aid scheme with effect from 6 April 2014. The Government announced at Autumn Statement 2014 that it would increase the investment limit, subject to EU approval. The Government announced at Autumn Statement 2015 that all energy generation activities would be excluded from SITR upon its enlargement.

The Explanatory Note for the draft legislation can be read here.