Due to recent proposals in the summer finance bill Plunkett is encouraging all groups who are planning a community share offer to discuss their plans for offering tax relief with the Small Companies Enterprise Centre at HMRC.

Our previous advice to community groups was to consider the tax relief available through the Seed Enterprise Investment Scheme, or SEIS (in the case of a brand new trading enterprise), and the Enterprise Investment Scheme (EIS) or Social Investment Tax Relief (SITR) schemes (in the case of the community taking on and managing an existing business). In the summer finance bill, there was a proposal to end the EIS and SEIS being used to fund the acquisition of an existing company or trade. This could have a significant impact on groups planning to establish a trading community enterprise when considering an existing business (as can be the case for pubs and village shops). Plunkett Foundation has been advised by HMRC that they are not granting advance assurance for EIS and SEIS until it becomes clear whether the proposals go ahead, and if so, the effective date.

It appears that SITR is not affected by the proposals, although there is a cap on the amount that can be claimed in tax relief, and qualifying societies can only offer tax relief on approximately the first £250,000 of investment. This is variable and is calculated by HMRC using a formula. This makes it difficult for groups wishing to raise more than that sum in community shares, and is the reason why EIS was preferable. This limit is currently being reviewed and it is hoped that it will increase.

A further change is to allow investors claiming up to £5,000 in tax relief, to do so through their PAYE rather than self-assessment.

We therefore would like to encourage any groups who are planning a community share offer to discuss their plans for offering tax relief with the Small Companies Enterprise Centre at HMRC, and they can be contacted via this link - https://www.gov.uk/guidance/seed-enterprise-investment-scheme-procedures#scec-contact-details