Business Investment Relief For Non-UK Domiciles
Do you qualify?
POSTED BY HELEN BEAUMONT ON 29/09/2017 @ 8:00AM
I recently attended a tax update when the lecturer asked if anyone in the room had claimed Business Investment Relief (BIR) on behalf of a client. I was the only one to raise my hand ...
It is possible for non-UK domiciles to qualify for Business Investment Relief!
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Apparently that was unusual; usually, no one raises their hand. So why does no one use this when in the right circumstances it is a very valuable relief?
"Mr A, is from Australia and has lived in the UK for several years when he approached me to act for him!"
He was currently employed in the UK and wanted to build a business to provide for him and his family in the future, once he decided to get out of the rat race.
The problem for most UK resident non-domicile individuals is that if they remit offshore income and gains to the UK, which had not previously been taxed in the UK, the amount paid will become subject to UK tax.
However, Business Investment Relief is available to non-UK domiciled individuals allowing them to bring their offshore funds to the UK and invest them in UK companies, without incurring a UK tax charge.
Prior to 6 April 2017, for the investment to qualify for BIR, it must be either a subscription for newly issued shares, or a loan, to a company. From 6 April 2017 onward, a qualifying investment will also include the acquisition of existing shares in a company.
"The company must be an unquoted trading, stakeholder or holding company which meets strict conditions for eligibility!"
For the purposes of the relief, HMRC's definition of 'trade' includes activities treated as trade for other tax purposes, as well as a business which generates income from land or property and activities involving research and development which are intended to lead to a commercial trade.
So going back to my client Mr A, he was able to set up his own limited company in the UK, bring his overseas income and gains to the UK and lend it to his company. The company then used those funds as a deposit to acquire commercial properties.
As with all reliefs, there are strict qualifying conditions:
BIR will not be available if the investor (or persons connected with the investor) receive, expect to receive, or are entitled to receive, a benefit from the company unless this is in the ordinary course of business (e.g. a salary, dividends, loan interest).
As of 6 April 2017, only benefits which are directly or indirectly related to the investment will trigger a clawback of the relief.
The relief is not automatic and must be claimed.
Any foreign income and gains which are used to make the investment will become taxable if a potentially chargeable event takes place and the appropriate mitigation steps are not taken.
Potentially chargeable events include the company ceasing to be eligible or the investor disposing of the investment and the mitigation steps must, in most cases, be taken within 45 days. This includes removing the sale proceeds offshore or reinvesting them in another company.
"Would you like to know more?"
If you're a non-UK domicile and would like to find out if you could qualify for Business Investment Relief, do call me on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
If you're looking to work with an expert tax advisor with a wide range of tax experience, do visit www.essendontax.co.uk to find out more about me and discover how I can help!
More about Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen’s specialist knowledge in tax planning and experience ensures every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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