What are the gross asset limits for Social Investment Tax Relief under section 257MC?

Under section 257MC of the Income Tax Act 2007, a social enterprise's gross assets must not exceed £15 million immediately before the investment and £16 million immediately after. The £1 million difference accommodates the increase in assets caused by the investment itself. Both thresholds must be met for the investment to qualify.

How are gross assets calculated for a group of companies under section 257MC?

For a group, the gross assets of every member are added together, but intra-group items are excluded to avoid double counting. This means shares in subsidiaries, securities issued by other group members, and intercompany debts are stripped out. The result gives a true picture of the group's external asset base.

What happens if a social enterprise breaches either the pre-investment or post-investment gross assets limit?

Both the pre-investment limit of £15 million and the post-investment limit of £16 million must be satisfied. If the social enterprise breaches either threshold, the gross assets requirement is not met and the investment will not qualify for Social Investment Tax Relief under section 257MC of the Income Tax Act 2007.

Why does section 257MC impose a gross assets requirement on social enterprises?

The gross assets requirement ensures that Social Investment Tax Relief is targeted at smaller social enterprises. By capping gross assets at £15 million before and £16 million after the investment, the legislation prevents larger organisations, as measured by their balance sheets, from benefiting from the relief intended to support smaller entities.

Income Tax Act 2007 section 257MC

The gross assets requirement

Section 257MC sets out the maximum gross asset values that a social enterprise (whether a single company or a parent company of a group) must satisfy immediately before and after an investment is made.

A social enterprise's gross assets must not exceed £15 million immediately before the investment and £16 million immediately after
The same £15 million and £16 million limits apply whether the enterprise is a single company or a parent company of a group
For a group, the gross assets figure is calculated by adding together the gross assets of every group member, but ignoring any intra-group assets such as shares in, securities of, or rights against other group members
Both thresholds must be met for the investment to qualify — breaching either the pre-investment or post-investment limit will mean the gross assets requirement is not satisfied

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