Good Deals 13: Social Investment Tax Relief alone won't bring investors, expert warns

A venture capitalist fund manager who's been running an Enterprise Investment Scheme fund (EIS) for ten years, told social enterprises today that it shouldn't assume the forthcoming social investment tax relief (SITR) will bring a flood of investors.

Speaking at the Good Deals 13 social investment conference's tax relief session, Rory Sterling, a partner at MMC Ventures, said: "If you think a tax incentive is enough to make people invest on its own, you're deeply mistaken because our industry has a terrible track record of returns.

The proposed SITR, which the government consulted on earlier this year, is due to be active from next summer. A draft plan for the scheme, which is said to mirror the EIS tax relief in some ways, will be released on 4 December, said Virginia Fenton, HMRC's lead on the SITR, also at the event.

The sector has been calling for tax relief for those investing in social enterprise for a number of years, but many were disappointed by the proposals put forward by government in the summer of 2013.

The government wants to limit the relief to only cover charities, community benefit societies and community interest companies, which representative body Social Enterprise UK says will mean nearly half of its members will not be eligible.

In addition, investment in each enterprise through the scheme is proposed to be capped at 200,000 Euros, and ventures with more than 250 employees might not be eligible.

In the session, Fenton was put under pressure over the narrowness of the proposed tax break. She said: "This is something new, it's a matter of having something in place and then monitoring it to see how it works."

She said there were 80 responses to the consultation which were "very different and broad".