Introduction Details of Schedule 11 Part 1 Chapter 2
25.Chapter 2 sets out some key terms used in determining eligibility.
26.New section 257K(1) provides that the scheme applies in respect of qualifying investments (as defined in Chapters 3 and 4) made on or after 6 April 2014.  It sets a limit of five years on the lifespan on the social investment tax relief scheme, but provides that this lifespan may be extended by Treasury order.
27.New subsection 257K(2) provides for the conditions for eligibility for SITR set out in Chapters 3 and 4 of the new Part 5B to differ where the social enterprise concerned is an accredited social impact contractor.
28.New section 257K(3) provides that the investor is not eligible for SI relief if the investor has otherwise obtained relief on the investment via the Enterprise Investment Scheme, Seed Enterprise Investment Scheme or the Community Investment tax relief scheme.
29.New section 257K(4) makes it clear that the conditions for relief apply equally whether individuals make the investment on their own behalf or whether the investment is made or held for them by a nominee.
30.Tax relief is contingent upon the individual making an investment, and the timing of the making of that investment determines the tax year for which relief will be due.  New section 257KB explains when the investment is to be considered to be “made”.
31.In the case of an investment in shares, new section 257KB(2) explains that the investment is considered to be made when the shares are issued to the investor.
32.In the case of an investment in qualifying debt investments, when the investment is considered to be “made” will depend on the nature of the investment agreement.   The legislation is intended to cater both for situations where the amount specified in the agreement is all paid over at the outset, as well as situations where an investor may commit to lend a sum of money to a social enterprise, but rather than drawing down the whole of that sum at the outset, the social enterprise is able to draw down smaller sums at intervals.
33.New subsection 257KB(3) and (4) deal with the situation where either the investment agreement involves only one advance of money being made to the social enterprise, or where an investment is the first of multiple cash advances to be provided to the social enterprise under the terms of the agreement.  It provides that the investment is to be regarded as “made” when the enterprise issues the debenture or debentures to the investor.  In the case of an investment agreement which does not involve anything being issued to the investor, then the investment is to be regarded as “made” when the debenture or debentures take effect between the social enterprise and the investor.
34.New subsection 257KB(5) provides that if the investment agreement involves multiple advances of money, then for each second and subsequent advance, the investment is to be regarded as “made” at the time of each cash advance to the social enterprise.  If the relevant debenture or debentures are issued, or otherwise take effect, at a date later than the date or dates each cash advance is made, the investment is to be regarded as made on the date of issue or the date the debenture becomes effective.
35.New subsection 257KB(6) explains that the term “debenture” in this context should be interpreted widely as including any instrument which creates or acknowledges indebtedness.
36.New section 257KC explains the terms “shorter applicable period” and “longer applicable period”.  Many of the eligibility conditions relating to the investor, the investment and the investee enterprises have to be met for a continuous period of time rather than merely at the point of investment, for the tax relief to continue to be available. In the case of some conditions, that continuous period of time runs from the date of investment.  In the case of other conditions, it runs from an earlier date – either the date of incorporation or, if later, twelve months before the date of investment. In all cases the continuous period ends with the third anniversary of the investment date.  Investors are not required to wait until the end of the relevant applicable period before claiming tax relief (see new section 257PA) but if any of the conditions are breached before the end of the applicable period, relief which has been given may be withdrawn or reduced (see Chapter 7).