Investment vehicle has brought in extra £3.4m for '˜third sector'

Then perhaps you should consider investing in the “third sector” – independent organisations that have been set up to serve the greater good. The Government is keen to help these organisations.

Charities and social enterprises have received £3.4m in two years thanks to Social Investment Tax Relief (SITR) introduced by the Treasury, according to research conducted by think tank NPC for Big Society Capital. NPC’s paper found that 30 projects have raised investment using SITR deals since April 2014.

On average, these investments have raised capital of £100,000 for charitable causes, including projects that are helping people who might have ended up sleeping rough.

The market has predominantly boosted organisations outside London, according to the research. The activity has focused on Scotland, which has a third of all projects, and the south west. Sadly, there seems to be a lack of awareness of these types of deals in Yorkshire. None of the organisations analysed by NPC was based in Yorkshire and the Humber.

So far, more than 170 investors have invested into SITR deals, including wealthy individuals and business angels. The report found that a growing number of retail investors – who are often members of the local community via community shares – are using SITR, with the average investment size as low as £230. NPC also found that SITR has predominantly helped organisations with revenues under £500,000 a year.

Simon Rowell, the interim head of strategy and market development at Big Society Capital, a financial institution which has been set up to boost social investment in the UK, said: “The evidence is in – Social Investment Tax Relief is working.

“It’s encouraging to find that smaller charities and social enterprises have been able to navigate the tax relief rules and are already finding SITR to be a useful new tool to help them grow.

“The affordability of SITR products is highly promising. There are now big opportunities for investors to follow the early leaders and use their investment account to support charities and social enterprises they believe in. Social Investment Tax Relief is now open for business.” Abi Rotheroe, NPC’s lead on social investment work, and the co-author of the new report, said: “Tax relief for social investment has freed up some much-needed money in the last two years.

“An extra £3m for good causes is welcome news when charity finances are under so much pressure.

“So far, the relief has had an impact beyond the usual places. Investment has taken off especially in Scotland and the south west, a welcome indication that we can unlock big philanthropy without leaving the regions behind.”

Investors can also benefit from tax relief and enjoy zero capital gains tax on cash invested through SITR.

Accountancy firm Hentons is advising investors that SITR offers a 30 per cent income tax relief on loans or equity investments made to charities and social enterprises. Simon Gray, a tax partner at Leeds-based Hentons, said: “Investors have been slow to take advantage of this scheme, which offers generous tax incentives. While this sort of investment isn’t for everybody, it can prove a savvy move as part of a wider portfolio.”

Individuals making an eligible investment can deduct 30 per cent of the cost of their investment from their income tax liability, either for the tax year in which the investment is made or the previous tax year. The investment must be held for a minimum period of three years for the relief to be retained.

Mr Gray continued: “Beyond the tax benefits, investors can feel good about helping smaller charities, and social enterprises grow. There are now big opportunities out there, and I’d encourage anyone to seek professional advice.”

He said he expected these type of investments to rise exponentially over the next few years.

He added: “There’s the philanthropic element. People really like to be doing things for their community.”

The Third sector is a term used to describe the range of organisations that are neither public nor private sector.

It includes voluntary and community organisations, both registered charities and other organisations such as associations, self-help groups and community groups, social enterprises, mutuals and co-operatives.

Third sector organisations are generally independent of Government and they are motivated by a desire to achieve social goals, for example, improving public welfare, the environment or economic well-being.