Tim Culverhouse - Partner
18 March 2014
Social Investment
Tax Relief (SITR)
Topic today
• Looking at the Who, What, When, Why and How of SITR
• CIC changes which could assist raising finance/investment
• Other finance raising topical at the moment
Francis Clark
• Independent accounting firm with 45 partners and over 400 staff
• Offices from Truro to Salisbury
• Tax and sector specialists
• My role
www.francisclark.co.uk
Why SITR, why now
• Government consultation launched by PM at G8 conference 6
June 2013 to look at best environment to help SE in Britain –
response to consultation issued 10 December 2013
• Tax system is often the key to creating the right environment for
investment and encourage sector growth further
• The proposed changes should give a more dynamic & interesting
environment for investment – attracting new investors
• Growing number of CICs and SE now looking for investment
• The current environment:
•
CHARITY
•
PHILANTROPHIC TENDANCIES
www.francisclark.co.uk
V
PRIVATE INVESTMENT/EQUITY
What is being given
• Fundamentally tax relief to individuals and a better investment
environment for Social Enterprises
• Income tax relief on Qualifying investments as a deduction from
tax paid (rate announced tomorrow – budget day) – 30%?
• Capital gains exemption on disposals of investments after the
minimum investment period (3 years) – early redemption =
clawback
• Capital gains tax deferral – roll over a gain made into the purchase
of qualifying social enterprise investment
• No tax relief given on dividends/interest earned
• Other relevant items include IHT relief and loss relief
www.francisclark.co.uk
Who can Qualify - Company
• Limited by guarantee or by shares
• Must have ‘social purpose’ and be regulated by someone who
monitors this – e.g. CIC regulator, Charity commission
• Employees less than 501
• Some activities are excluded (compared to EIS)
•
Agriculture
•
Coal and steel
•
Ship building
•
But SITR now includes Nursing and care homes (EIS doesn’t)
•
& Lending companies who lend to CICs/SEs (EIS doesn’t)
• Very strict rules to follow – seek advice to qualify
www.francisclark.co.uk
Who can Qualify - Individual
• UK resident paying tax
• You only get relief if you have tax due (HNWs a target?)
• Likely £1m cap on investments per investor per year
• Limit on amount of ownership you can have is likely (30% or less)
• Differs to Community Investment Tax Relief (CITR) which gives the
investee 5% relief on the investment per annum for five years.
www.francisclark.co.uk
What can qualify – the investment
• Shares / Equity
• Loans / Debt
• No security given and lowest ranking on a wind up
• No entitlement to early repayment
• Redeemable shares are possible (but watch for withdrawal of
SITR)
• MUST CARRY RISK TO THE INVESTOR
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Why seek investment
• Expertise and cash
• Shared risk and reward
• Structure to company
• Forward planning and cashflow
• Speed up the process for development
• Downsides
•
Shared reward
•
Pressure and reporting
•
Formalities
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Changes – CIC regulations
• At 30 November 2013 there were 8666 CICs listed
• Access to investment remains a barrier
• Just 25% of CICs continue to opt for ‘Limited by shares’
• Conclusions from consultation:
•
Remove maximum dividend per share cap
•
Maximum aggregate dividend cap should remain at 35%
•
Performance related interest rate increased from 10% to 20%
Timetable for change will be introduced soon by CIC regulator
www.francisclark.co.uk
Sources of funding
• Individuals / Philanthropists
• VCTs and Angel investment
• Peer to peer lending
• Crowdfunding / Crowdsourcing
• SWIG
• PWGF and Grants
• Bank lending (security often required personally)
• To name but a few…. If interested, speak to Corp Finance team
www.francisclark.co.uk
Growth Accelerator
• Francis Clark are approved Growth Accelerator coaches
• This can enable you to have assistance in your business to help
with business development
• It can also helps fund leadership and management opportunities
for staff
• 1 – 4 ee’s £600 + £700 VAT
• 5 - 49 ee’s £1,500 + £700 VAT
• 50 – 249 ee’s £3,000 + £700 VAT
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Recover VAT if registered
Thanks for listening
QUESTIONS or COMMENTS
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