Business Investment Relief – HMRC Consultation

Business Investment Relief (BIR) was introduced in April 2012 to encourage individuals who are taxed on the remittance basis to invest their foreign income and gains in businesses in the UK.

The scheme effectively treats funds brought to the UK for the purposes of making a qualifying investment as not remitted to the UK and therefore not liable to tax.

The types of company in which a qualifying investment can be made under the scheme are very widely drawn. The definition includes an investment in:

  • a company carrying on a commercial trade or preparing to do so, including one whose activities can consist of generating income from land;
  • a company carrying out research and development activities;
  • a company making commercial investments in trading companies;
  • a holding company of a group of trading companies.

Any investment must be made within 45 days of the date on which the funds are brought into the UK and there is a general requirement to send any proceeds from the subsequent disposal of investments back overseas within 45 days of the realisation of the investment in order to secure exemption from UK Capital Gains Tax on any gains arising on the investment and the making of the investment itself*. [It should be noted that if any of the relevant conditions are not met the amount brought into the UK to make the initial investment will potentially be subject to UK tax.]

There is no financial limit on the amount that an individual can invest using the scheme.

The government is consulting and would be interested to hear of any aspects of the scheme which are unnecessarily complex which might be simplified without undermining its purpose. The consultation period closes on 20 October 2016.

Any legislative changes will be included in Finance Bill 2017 and will take effect from 6 April 2017.

(* assumes the taxpayer is UK resident, not deemed-domiciled and a remittance basis user)

PTX@arnoldhill.co.uk

0207 306 9100

The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.