Tory MP Nick de Bois has said it’s wrong that banking community development finance institutions claim 70 per cent of community interest tax relief, and has argued for it to be tailored to non-banking community development finance institutions which are currently starved of capital.

Speaking in a Parliamentary debate on the Budget last week, de Bois welcomed the news that there will be a consultation on a new tax relief for social investment and suggested that changes to community interest tax relief (CITR) were also necessary.

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 source investment that they may find difficult to secure elsewhere.

In Wednesday's Budget, the government increased the amount of time organisations have to spend money raised through the relief. But, it also placed limits on the amount of tax relief an organisation can obtain in a three-year period. 

De Bois highlighted to MPs last Friday that banking community development finance institutions (CDFIs), claim 70 per cent of CITR:

“These are the wrong people, he said. “They are not focused on lending at a local community level, or to the disadvantaged like non-banking CDFIs.”

He said that CITR should be tailored to attract more investment into non-banking CDFIs. “Capital funding for CDFIs has more than halved in the past year, while demand for lending grows,” he warned.

During the debate an MP also argued that CITR should be reformed to allow for direct investment into social sector organisations, not just intermediaries.