Photo copyright: BeeBee Wraps, an alternative to plastic cling-film
Organisations that have a social and community focus contribute to a more equal society which puts people, communities and the environment first. However, of the 100,000 + social enterprises and SMEs in the UK which contribute £60 billion to the economy and employ 2 million people, 60% struggle to access affordable finance. This is where a little know tax relief called CITR has a useful role to play.
Community Investment Tax Relief CITR is a tax relief that enables people who invest in accredited CDFIs, to offset their annual tax bill by 25% of the value of their investment over a 5-year period, after which investors are invited to re-invest for a further 5-year period or withdraw their funds.
CITR equates to a pre- Income Tax return of 6.2% for 20% tax payers, 8.3% for 40% tax payers, 9.1% for 45% tax payers. So, assuming you are a 45% tax payer and you invested £10,000 in CITR shares you would be able to offset your annual tax bill by £500 each tax year for 5 years.
In order to achieve the same return as purchasing CITR shares in Foundation East can provide, you would have had to invest in shares that returned 9.1% i.e.£10,000 @ 9.1% = £910 less tax @ 410% = £500.
Community Development Finance Institutions (CDFIs) are social enterprises that provide debt finance and business support to underserved business owners, by virtue of their gender, ethnicity, location, lack of security, unusual business models, low credit scores and trading history. Foundation East is a CDFI and only lends to Small and Medium Size Enterprises (SMEs) and Social Enterprises that are unable to access finance from a mainstream source and prioritises its lending to those businesses that create employment and save jobs.
Check out this short animation which shows you how
Foundation East is a mutual society and has been operating for the past 15 years lending £10 million to small businesses. Since 2005 Foundation East has been accredited by HMRC to offer its investors CITR. Each month Foundation East receives £1million in funding enquiries.
A Foundation East Investor “Shares in Foundation East qualify for a tax relief aimed at stimulating community investment. Becoming a member enabled me to obtain a good return (by way of tax reduction) and at the same time channel resources to business ventures focussed on wealth creation.”
BeeBee Wraps, a manufacturer of organic food wraps founded by young mum Kath Austin and started around her kitchen table. BeeBee Wraps mission is to reduce the amount of single use plastic that goes to land fill or ends up in the sea. Each wrap is washable and can be re-used 100 times and is then compostable. Kath was unable to get the funds she needed to scale up the operation to meet demand from her bank because her business was at too early a stage for the banks risk appetite.
Harry Specters Chocolates, who provide employment to people who have autism and to young entrepreneurs.
Fabio’s Gelato, who not only create great ice cream but also employ people from their local area.
By investing via Foundation East’s CITR shares people have enabled us to lend to over 600 small businesses and supported the creation of 1,250 jobs in the eastern region of the UK in organisations like the ones listed above who other funders just weren’t prepared to take the risk in.
What’s great about CITR is that not only is it good for investors in terms of financial returns, it also helps boost the economy and delivers a demonstrable social impact. You can find out more about the social and economic impact which Foundation East creates through its investments in this document demonstrating how for every £1 spent supporting businesses £15 of economic impact was achieved.
Find out more about supporting Foundation East via CITR: https://www.ethex.org.uk/FoundationEast
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