Impact Policy Tracker Policy

Social Investment Tax Relief (SITR)



The Social Investment Tax Relief (SITR) scheme was introduced in 2014 through the UK’s Finance Act 2014 to incentivise private investment in social enterprises and charities. Under SITR, individual investors could deduct 30% of the value of their investment from their income tax liability and defer capital gains tax when reinvesting gains into qualifying social enterprises. Additional benefits included loss relief and inheritance tax exemption (for equity investments). This tax incentive applied even if the investment generated no financial return, offering a form of indirect compensation through tax relief. 


Between 2014 and 2020, SITR supported approximately 110 social enterprises and mobilised £11.2 million in investment. However, uptake remained below expectations due to complex rules, narrow eligibility criteria, and restrictive EU state aid regulations that capped the amount eligible for relief. The UK government ended the scheme for new investments on 6 April 2023.



Highlights

  • Pioneering tax relief for social investment: The UK was the first country in the world to introduce a dedicated tax incentive for social investment. 

  • Specifically designed to address financing barriers faced by social enterprises: SITR was created in response to the difficulty social enterprises face in raising capital. Many are excluded from existing tax-advantaged investment schemes like the Enterprise Investment Scheme (EIS) due to their legal structure or non-profit orientation. By offering tax incentives tailored to mission-driven entities, SITR aimed to attract investment despite perceptions that social goals might limit financial returns.

Government’s Role:
Market Regulator


Country:
United Kingdom

Policy Type:
Fiscal Incentives

Year: 2014

Responsible Institution:
UK Parliament

Fiscal Incentives

What are Fiscal Incentives for Stimulating the Impact Economy?

Fiscal incentives are public policy tools that governments can use to channel private capital towards social and environmental goals. These typically take the form of tax exemptions, which either reduce investors’ tax liabilities or offer exemptions directly to impact businesses.


In some cases, such incentives are tied to a specific legal status - such as Benefit and Collective Interest Companies (BICs) in Colombia - while in others, they are designed to encourage investment in Social Impact Bonds (SIBs), as seen in Portugal, or to enable investors to deduct a portion of their investment from income tax, as in the UK.