The Community Investment Tax Relief (CITR) scheme* encourages investment in disadvantaged communities by giving tax relief to investors who back businesses (and other enterprises) in less advantaged areas.

The tax relief is available to individuals and companies and is worth up to 25% of the value of the investment in the community development finance institution.

The relief is spread over 5 years (5% claimable each year), starting with the year in which the investment is made.

The scheme was introduced by the Government in 2003 and encourages investment into disadvantaged communities by giving a tax relief to investors who invest into accredited Community Development Finance Institutions (CDFIs).

The CITR scheme encourages the growth of CDFIs, which specialise in investing in businesses, social and community enterprises within under-invested areas, that find it harder to access mainstream finance / bank lending”The scheme applies only to investments made through accredited CDFIs - direct investment in enterprises within disadvantaged communities does not qualify for CITR.

The tax incentive is a form of tax relief, which reduces the investor’s income tax or corporation tax liability.

• The relief is worth up to 25% of the money invested, spread over five years
• To obtain maximum tax relief under the scheme investors must hold the investment for at least five years. But there is scope for investors to receive some return on their investment over the course of those five years without sacrificing all of the relief that the scheme provides.

There are currently around 30 CITR accredited CDFIs in the UK (there are also other CDFIs which specialise in lending to individuals, and to which CITR does not currently apply). In 2022, accredited CDFIs raised over £23m to lend to businesses and social enterprises through CITR (1).

Resonance’s new Enterprise Investment fund allows Professional Investors** to access this tax relief through Resonance Enterprise Investment CIC which is an accredited CDFI. 

The fund enables Professional Investors’ money to be deployed as investments to social enterprises via four different accessible and flexible finance options. With CITR, investors can offset up to 25% of their investment against their tax bill. The tax relief is spread over 5 years (5% claimable each year) from the year in which the investment is made with the aim of returning their totals investment back to them within 5-6 years. Professional investors should remember their capital is at risk if they invest in the fund and Tax treatment depends on individual circumstances may be subject to change in future and this article does not constitute tax advice.

The fund will support social enterprises focusing on three key impact areas:

• Tackling socio-economic inequality
• Improving health & wellbeing
• Supporting a Just Transition to a low-carbon economy

This fund launch consolidates our years of learning and experience in raising investment from aligned investors, helping social enterprises to grow their business and impact in a sustainable way. We are really excited to keep this journey going as part of the CDFI sector.

There are more than 130,000 social enterprises in the UK, contributing £78bn to the economy and employing around two million people (2). They are at the forefront of putting people and planet first, driven by social and environmental missions to create positive change.

If you are a Professional Investor you can find out more about the Resonance Enterprise Investment fund by contacting us at  [email protected].

*The CITR scheme is jointly run by HMRC and the Department for Business, Energy & Industrial Strategy (BEIS). BEIS is responsible for accreditation of new CDFIs and the ongoing management of the scheme. HMRC oversees the relief. 

Resonance Enterprise Investment is an Alternative Investment Fund (AIF). It is structured as a Community Interest Company (CIC) and is accredited as a Community Development Finance Institution (CDFI). Further detail on CITR can be found on the Government website: https://www. gov.uk/government/publications/community-investment- tax-relief-citr/community-investment-tax-relief-citr. 

**Professional Investors are investors who qualify as FCA Professional Clients.

Nothing in this document should be regarded as constituting investment, taxation, legal or other advice. The value and availability of Tax Reliefs will depend on the individual circumstances of a prospective investor and may be subject to change in the future. 

1. Statistics from Responsible Finance https://responsiblefinance.org.uk

2. https://www.socialenterprise.org.uk/all-about-social-enterprise/facts-and-figures/