Community investment tax relief was introduced in 2002 under the previous Government to encourage investment in disadvantaged communities. In practice, individuals and companies that invest in  accredited community development finance institutions by way of equity or loan are able to claim income tax relief or corporation tax relief of 5% of the amount invested over five years, as long as the investment remains. There are detailed rules about when the investment may be withdrawn.

My understanding is that clause 71 will relax the current onward lending roles of community development finance institutions. At present, the onward lending limit requires them to re-invest at least 25% of the fund by the first anniversary of the accreditation date, 50% by the second anniversary and 75% by the third. With effect from April 2013, the annual dates for calculating whether the prescribed level of onward level has been obtained will be altered from the anniversary of the community development finance institution’s accreditation date. That is obviously a welcome move, as it enables more time for community development finance institutions to meet the required onward lending limits.

My understanding is that state aid approval for the scheme expired in October 2012 and that in order to continue with the relief, the Government have had to amend it to meet state aid requirements. What assessment has been made of the additional investment that is expected to be made from CDFIs as a result of the changes? The tax information and impact note states that the new limit on corporate investors will affect only a small number of companies, as around 120 companies have made an investment under the scheme, with fewer than 10 affected by the cap. How many CDFIs have those 10 companies invested in? How much have they invested to date? The number of companies alone does not give a full sense of the amount of investment that we are talking about.

What more can the Government do to persuade corporate investors to participate in the CDFI scheme, given that there have been only 120 investors out of a potential 3,100 since 2002? In assessing the changes to comply with state aid rules, have the Government also considered how to boost the scheme?