To apply for use of the relief for investment purposes, organisations must have a defined and regulated social purpose. Charities, community interest companies or community benefit societies carrying out a qualifying trade, with fewer than 500 employees and gross assets of no more than £15m may be eligible. The normal process is to apply for an advance assurance application from HMRC to see whether the investment vehicle qualifies for the relief.

Certain activities, including asset leasing and on-lending, are excluded from the scheme on a permanent basis.

The government also plans to bring investment in nursing homes and residential care homes into the scheme with the introduction of an accreditation system to allow such investment to qualify for SITR in the future.

The limit on full-time equivalent employees will be reduced to 250 from the current 500 under the new rules.

At the moment, the EU caps the level of individual investment at around £250,000 over three years while individual investors can invest up to £1m subject to personal annual investment limits.

If you make a qualifying investment in a social enterprise, including a charity, social investment tax relief (SITR) can:

• give a reduction of 30% of that investment on income tax bill for that year;
• allows deferral of a capital gains tax (CGT) charge if you reinvest the profits into a social enterprise; and
• after three years, allows the investor to sell or give away SITR-qualifying investments that have gained in value, without paying CGT.

The measure is likely to cost the Exchequer £20m over the next three years.

The government will undertake a review of SITR within two years of its enlargement and keep the system under review.

The HMRC guidance on Social Investment Tax Relief is available here