You want to inject an ethical component into your investment? Well, we have good news – with SITR, you can have your cake and eat it too.
The so-called "impact investment", in which investors aim not only to make money but also to make the world a better place through their investments, is a relatively new concept – but partly because of the efforts of these investors Mark Zuckerberg and his wife Priscilla Chan, leading personalities who combine their investments in for-profit companies for philanthropic purposes, are increasingly interested in the idea.
And why not? Helping others while you help is a great idea. In addition, as Impact Engine points out, "Investors see big financial opportunities related to the impact: PwC megatrend analysis reveals several trends that suggest that healthcare, education , urbanization, the rise of emerging economies and climate change will be among the greatest challenges and opportunities in the coming years. "
The case makes sense, not only from a social point of view, but also financial. The 135 social enterprises identified in the SEFORIS report (2016) generated approximately £ 450 million (~ $ 614 million) of revenue in 2014. Of these, 65% had increased their incomes compared to the previous year. last year. Not bad, is not it?
How to spot a social enterprise
There is no fixed definition for "social enterprise", but Social Enterprise UK states the following criteria (and, in fact, who will argue with them?) :
- Have a clearly defined social and / or environmental mission in their government documents
- Generate the majority of their income through trade
- Reinvesting the majority of their profits
- Be autonomous from the state
- To be controlled by the majority in the interest of the social mission
- Be responsible and transparent
Tax Relief on Social Investment
Tax Relief for Social Investment (SITR) is a relatively new tax break designed to encourage individual investors to support charities and social enterprises by giving them a 30% tax break on loans or equity.
Thus, by lending £ 10,000 to a social enterprise, an investor would receive a £ 3,000 reduction in this year's income tax bill, as well as a possible deferral of the tax bill. 39, capital gains tax.
Initially modeled on his more illustrious brother, EIS, SITR shares many qualities and criteria.
A business must meet a series of conditions relating to size, legal status and so on in order to qualify for SITR – a breakdown of these criteria can be found in the essential guide of Big Society Capital for the 39, tax relief for social investment.
Another thing you will notice is that SITR is applicable to loans as well as equity, which means that these types of social investing can be as good for your liquidity as for your soul. There are obviously criteria in this regard, and I encourage all investors to make sure that you feel comfortable with these before investing any capital.
SEIS / EIS
These are overwhelmingly the stars of the tax incentives that British investors can benefit from. SEIS and EIS – the "Seed Business Investment Program" and the "Business Investment Plan", but you already know it – offer generous tax breaks when investments are offset with income tax. These are designed to mitigate risk for investors and encourage them to invest in start-up companies.
These are two of the most generous tax relief plans that exist, with EIS offering up to 30% tax relief on your initial investment – and offer SEIS up to $ 25,000. 39 to 50%. SEIS is only available for the first £ 150,000 of investment in a company, but it simply means that, from an investment of £ 10,000 in a SEIS business, an investor risks losing a maximum of £ 5,000 – and this is not taking into account the relief of losses or relief of capital gains, which places investors in an even better situation.
This exemption is granted only to companies incorporated in the United Kingdom that may issue common shares. As such, it is applicable to B Corps and other companies of social interest that do not yet carry the official title, which means that you, as an investor, are not put aside for invest in a socially responsible company. by profit.