Chapter 30 Social Investment Tax Relief

Question 1

Social investment tax relief

Answer 1

This is a tax reducer at 30% and encourages individuals to invest in social enterprises.
Eligible investor – any individual who pays tax in the UK, must not own more than 30% of the social enterprises ordinary share capital and must not be employed or a paid director of the social enterprise. You must not hold shares or debentures in the enterprise unless they were acquired as part of an issue which qualified for income tax relief or the shares already held are subscriber shares.
Eligible investment – must be newly issued shares or new debt. Both share and debt investments must not be entitled to a return greater than a reasonable commercial value.
Eligible organisation – must be a registered charity, community benefit society or a community interest company. The organisation must be unquoted at the time of investment and the next 3 years, not be under the control of another company for three years, meet the final health requirement, less than 250 full time employees, only have qualifying subsidiaries, less than £15 million gross assets and carry on a trade.
Relief for investor – relief is at 30% of the amount invested, maximum of £1 million a year. there is a carry back of one year. a claim can be made up to 5 years after the 31 January following the tax year in which the investment is made.
Withdrawal of relief – must be held for 3 years. If investor gives away shares all the relief is withdrawn, if sold the relief withdrawn is the sale proceeds multiplied by the initial rate of relief obtained. Full relief is withdrawn if any of the qualifying conditions cease to be met during the 3-year period.