Community Investment Tax Relief

The Community Investment Tax Relief (CITR) is a tax relief for investors who invest in enterprises in disadvantaged communities through Community Development Finance Institutions (CDFIs). The purpose of the relief is to encourage economic growth in these businesses and communities.

If you’re looking to invest, the following investments are eligible for CITR:

  • Subscriptions for shares in a CDFI
  • Subscriptions for securities of a CDFI
  • Loans to a CDFI (or a deposit with a CDFI that is a bank)

What is a Community Development Finance institution?

A CDFI can be a number of things. They provide financial backing to both non-profit and for-profit organisations that operate in disadvantaged communities. Here’s how they’re described by HMRC:

  • Community loan funds – these funds make money available to community regeneration initiatives and businesses
  • Micro-finance funds – these make very small loans, usually at low interest rates, to the smallest businesses, e.g. sole traders
  • Social banks – these profit-seeking financial service providers are dedicated to social or environmental objectives

How does CITR work?

With the Community Investment Tax Relief, you can claim up to 25% of the value of your investment, whether you’re a single investor or company. This 25% is spread across 5 years from the year you initially invested. This works out in practice as up to 5% each year.

If you want to claim the maximum relief from your investment, you must hold your investment for a minimum of 5 years. The relief, however, can only be claimed against Income Tax or Corporation Tax (if you’re a limited company) and can’t be used to offset Capital Gains Tax if you make a profit from your investment.

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