Community Investment Tax Relief
The Government consulted on the operation of Community Investment Tax
Relief (CITR) scheme and other incentives between December 2006 and the end
of February 2007.
CITR is a type of tax relief available to investors in accredited Community
Development Finance Institutions, which provide loans and business support
to individuals and businesses, including social enterprises, in
disadvantaged communities.
The review of the scheme stemmed from the
Social enterprise action plan, published on 16 November 2006, in which
the Government made a commitment to work with the finance and social
enterprise sectors to improve the ability of social enterprises to access
the finance they needed. The review was carried out by HM Treasury and the Office of the Third
Sector with the Small Business Service and HM Revenue and Customs.
The Government invited interested parties to submit evidence via email on
how the operation of the tax relief and other incentives might be improved.
The consultation ended on 28 February 2007.
Result of the consultation
On 21 March 2007, the then Chancellor of the Exchequer, Gordon Brown,
announced a change to the rules around CITR in the Budget.
The change allows funds under CITR to be used more flexibly by Community
Development Finance Institutions (CDFIs). This will benefit these
institutions, many of which are social enterprises, but also those
organisations that borrow from them.
The change was to the operation of tax incentives for those investing in
disadvantaged communities via CDFIs. The change allows CDFIs to keep an
average of 75% of their fund onward invested, instead of a minimum of 75% –
providing more flexibility in the way they manage their loan books.
This change was part of the review of the operation of the CITR. The Office
of the Third Sector is continuing to build evidence on social
enterprises' access to finance, to establish whether there are
inefficiencies in the market that need to be addressed.
