The government has so far received 40 applications for social investment tax relief - a record described as "healthy" by social finance experts.

Figures released from HMRC at the end of last week ahead of Social Saturday – a national campaign that celebrates social enterprises which took place at the weekend – show that 40 organisations have applied for clearance to raise SITR eligible investment since the scheme opened in April 2014.

SITR allows individuals to invest in or lend money to charities, social impact bonds and social enterprises with an asset lock, and claim back 30 per cent of the value of the loan against tax.

Simon Rowell, strategy and market director at social investment wholesaler Big Society Capital, said he was pleased with this level of takeup.

"We're encouraged by the interest level," he said. "We're encouraged to see that small charities and social enterprises are finding it useful."

He said five deals had so far concluded and been made public, and that BSC was aware of several others.

"We hope to see ten or more in the next two months," he said.

He said the success of SITR could not be measured until the UK government receives state aid approval from the EU which will allow much larger sums of money to be raised. At present organisations can raise less than £300,000 using SITR.

He said that many organisations were taking loans of around £50,000.

Luke Fletcher, partner and head of social finance at law firm Bates Wells Braithwaite told the Charity Law Association conference last week that charities have been slow in accessing SITR when compared to social enterprises.

Fletcher said that charity uptake was likely to be slower due charity trustees being “more risk averse” when it comes to debt.

The Treasury said it expects SITR to unlock over £500 million of investment directly into the social sector by 2020.

Fletcher told Civil Society News: “Our impression is that charities have been relatively slow in accessing the relief when compared to social enterprises.

"We have mostly seen community interest companies and accredited social impact bonds in the SITR transactions we have been doing, rather than charities.

"I would not be surprised if that is because charity trustees are slightly more risk averse when it comes to taking debt directly onto the balance sheet but I could not say for sure.

“We have had some interest from charities and charity trustees but this has not developed into many transactions at this point, which may also be something to do with the time it takes to get charity stakeholders on board.”

Fletcher, who featured in Charity Finance's 25 under 35 - a list of the top performing sector professionals under the age of 35 - said it was good to hear that 40 applications have been made for SITR, as this shows a “healthy appetite given the relief is so new”.

He said he “fully expects the number to shoot up once the relief increases in size, so things looks promising”.

Fletcher said that his own view is that “SITR is one of the most significant actions taken by the previous Government to support the social investment market. It is a generous relief and so I expect over time it will prove to be quite significant”.

Fletcher also told the conference that SITR is an "interesting example of how charities and social enterprises are joined at the regulatory hip. The way that the regulation of the two needs to be thought of in tandem." 

 

In a statement last week Damian Hinds, exchequer secretary to the Treasury, said: “Our social investment tax relief is helping charities and social enterprises do more, ensuring they can access the capital they need to grow.”

“Since the scheme launched in 2014, we’ve seen organisations from across the UK, such as FC United, go from strength to strength.”

FC United used the tax relief to raise £270,000 from investors since 2014, which has helped them to build a new stadium and engage with over 2,000 members of the local community, including leading youth projects for vulnerable children.

A spokesman from the Treasury said it is unlikely to have an accurate picture of the people who benefit from SITR at this stage, as claims for tax relief are generally made at the end

. However, he said that two further organisations, Social Investment Scotland and Resonance, have raised funds of £1m and £5m respectively from individual investors; and this will all be invested in social enterprises and eligible for SITR.

Additional reporting from Emily Corfe.