Social investment tax relief is a “an invitation for tax avoidance”, a delegate at the Charity Tax Group annual conference said yesterday.

Dame Hilary Blume, director of the Charities Advisory Trust, told the conference at the Wellcome Trust in London that she was opposed to the relief because it would attract those interested in profit rather than social good.

SITR was introduced in the Finance Act following the most recent Budget. It allows anyone lending money to a charity, community benefit society, community interest company or social impact bond company to reclaim 30 per cent of their loan in tax relief. It applies only to the riskiest debt, and to the first £284,000 borrowed by the charity.

“This is money which could be used to help ordinary people and the poor,” Blume said in a question from the floor of the conference. “I think it’s a bad principle to keep giving tax relief to the rich.

“If you look at the effect of social investment tax relief in this country, we’re encouraging debt. Have we learned nothing?”

Blume said that the relief was vulnerable to people whose aim was to minimise their tax bill.

“Social investment is an invitation for tax avoidance,” she said.

Greyham Dawes, director in the not-for-profit unit at accountants Crowe Clarke Whitehill, said SITR was a “redundant relief” which would attract “predatory investors who ask what they can get out of the charity world”.

But Simon Rowell, strategy and market development director at Big Society Capital, told the conference that the relief would be extremely useful to those charities with “revenue-generating activities” such as trading with government or with individuals, and suggested it might be possible for charities to use the relief to receive low-interest loans.