Social Investment Tax Relief (SITR) Tim Culverhouse - Partner 18 March 2014.

Social Investment Tax Relief (SITR)

Tim Culverhouse - Partner

18 March 2014

www.francisclark.co.uk

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


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 V PRIVATE INVESTMENT/EQUITY

• PHILANTROPHIC TENDANCIES


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


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


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.


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


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


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


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


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 Recover VAT if registered

• 50 – 249 ee’s £3,000 + £700 VAT


Thanks for listening

QUESTIONS or COMMENTS


(c) copyright Francis Clark LLP, 2014

You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence.

To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP.

These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free.

Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.

These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request.

Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.

Disclaimer & copyright

Social Investment Tax Relief (SITR) Tim Culverhouse - Partner 18 March 2014.

Documents

investment expertise

loss relief slide

salisbury tax

better investment environment

tax system

investor slide

iht relief

role slide