For start-up social enterprises like East Learning CIC, Social Investment Tax Relief has been an invaluable tool to grow. However, due to a sunset clause in the legislation on the relief, it may be retired by Government in April 2021 unless action is taken now to prevent this. Read on to learn more and how you can help.
Watch the video below where co-founder Angharad Thomas talks about the challenges of accessing finance as a start-up and how finding SITR was a lifeline to raising the capital they needed to grow.
Like many social enterprises and charities, East Learning CIC does not offer shares. Instead, it has an asset lock meaning that any profit or surplus generated is used for the benefit of its mission. This also means that it cannot use tax incentives like the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) to raise investment. Both the EIS and SEIS are mainly aimed at commercial companies who offer shares in their company. And the two schemes can only be used to raise equity finance.
SITR was established to help level the playing field for social enterprises and charities and is designed to help them raise investment that could be loan finance or equity. In East Learning CIC's case, it was exactly what they needed to grow at a time they were deemed too risky for other types of finance. And as Angharad explains in the video, for them, SITR also provides them with flexibility where other funding options can't.
Action needed now to prevent SITR being retired
Due to a sunset clause in the legislation, SITR may be retired by Government in April 2021 unless action is taken now to prevent this.
Unless that action is taken, millions of pounds of investment capital will be handed back to individuals who wanted to support social enterprises like East Learning CIC. Alongside organisations across civil society, we believe SITR could be improved to be more effective and have submitted evidence as part of the Government's consultation on the relief.
Understandably, HM Treasury has not been able to conclude its consultation on SITR and so we are advocating for a two year time extension. This would allow the relief to continue to support social enterprises and charities looking to raise flexible, patient and more affordable finance in the meantime.
It would also give HM Treasury the time it needs to properly consider the responses to their SITR consultation, which include how it could be improved and expanded to help more organisations.
Now is not the time to lose something that is already working to unlock much-needed capital for social enterprises and charities who will play an important role in the country's recovery from the COVID-19 pandemic and to #BuildBackBetter.
Can you write to your MP?
There is an opportunity to extend the tax relief from April 2021 to April 2023 through an amendment in the Finance Bill currently passing through Parliament. Could you write to your MP to ask for their help to protect this vital support for organisations?
How do I write to my MP?
You can send an email to your local MP. Your MP's email address can be found here, and there's a couple of email templates you might use below.
For more on what SITR has helped to achieve in its relatively short lifetime, see SITR at a glance.
Learn more about East Learning CIC
East Learning CIC supports schools and regions across the UK to narrow the disadvantage gap for young people through an online personal development platform. With the money raised using SITR, East Learning CIC went from supporting 3,000 young people across England to over 30,000 in a year.