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Community Investment Tax relief

A scheme that offers tax relief on money used to set up small businesses or community projects in socially deprived areas.

You cannot invest directly in these ventures - only through an accredited community development finance institution (CDFI). You invest by subscribing for shares or securities in the CDFI by making it a loan. Alternatively, some CDFIs are structured as banks with which you can open an account to make your investment.

You can earn some return on your investment, which you can keep or donate to the CDFI's work. You get a tax relief equal to 5 per cent of the amount you invest in the year you make the investment and in each of the following four years, provided your money is still invested.

This gives you a maximum of 25 per cent tax relief overall. Tax relief is given as a reduction in your tax bill. If the relief comes to more than your tax bill for the year, the excess is lost. Claim the tax relief each year through your tax return or by contacting your tax office.

This information was taken from the Financial Times guide to Personal Tax 2011-12. It is available for purchase here.

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