Charity Bank says its community interest tax relief deposits (CITR) create an average £7 return to society for every £1 forgone by the Exchequer, and has urged the Treasury to rethink its decision to include CITR within the limit on all uncapped income tax reliefs.
Last Friday, it was confirmed by the Treasury that community interest tax relief would be included in its contentious proposed cap on tax relief.
A Charity Bank spokesman said: “We are disappointed that CITR has been captured within this charitable giving tax relief cap. This decision ignores the significant benefit that CITR delivers not only to deprived communities, but to society as a whole.
“A study on what is achieved by charities and community enterprises we support with CITR deposits, using the government’s own formula, showed an average £7 return to society for every £1 forgone by the Exchequer, suggesting tax reliefs for charity should be extended, rather than limited.”
Damage to social investment market
Elsewhere, Chris White MP and four other Tory MPs have fired off a letter to Exchequer Secretary David Gauke, warning the decision on CITR could damage social investment and urging a rethink:
“We believe that as a consequence of this decision, there is a real danger that confusion will be created amongst potential investors into the social enterprise sector about the government’s intentions and the strength of the government’s support for its development,” White says in the letter.
Since becoming an MP in 2010, White has been a strong proponent of the social enterprise sector, most recently sponsoring the Social Value Bill, which stipulates that public bodies will have to consider social and environmental benefits as well as financial aspects when awarding contracts.
Social Enterprise UK has also slammed the proposed cap on CITR, saying it will severely hinder an increase in social investment and the growth of the social enterprise sector.
Its chief executive Peter Holbrook said:
“The news of the cap on social investment has baffled the social enterprise sector. Earlier this month we saw the prime minister launch Big Society Capital – which has pumped an impressive £600m into the social investment market. Now it seems the government has seriously undermined its commitment to growing the market by creating more barriers to social investment before it’s properly off the ground.”
NCVO chief executive Sir Stuart Etherington voiced similar concerns on Friday; however, Big Society Capital chief executive Nick O’Donohoe has argued it is not hugely relevant as CITR is not an effective tool to stimulate social investment in its current form anyway.
The CITR scheme was introduced in 2002 to support investments in local communities and social enterprises. It gives 25 per cent tax relief (income or corporation tax) to investors who invest in accredited intermediaries, allowing social sector organisations to find investment that they may find difficult to secure elsewhere.
Since its introduction in 2002, £63m has been raised.
