Business Investment Relief: The Chancellor makes work for idle money
BIR was an attempt by a fresh faced George Osborne, as I recall as part of his emergency budget when the LibCon coalition had just come in to power, to unlock the power of non-doms foreign income and gains.
As a reader of our other notes on the non dom changes will be aware, the remittance basis of taxation means that non doms are encouraged to leave their income and gains offshore. Idle money from a UK perspective. If money had thumbs, they it would be twiddling them.
So from this perspective Business Investment Relief was born. It was supposed to unlock a veritable mountain of inward investment. Broadly, Business Investment Relief would allow foreign income and gains to be brought to the UK to invest in qualifying UK commercial activities.
In such circumstances, no remittance tax charge would arise upon the funds being used or enjoyed in the UK.
What was, and remains, surprising was the definition of qualifying UK commercial activities. It is defined in an incredibly broad manner.
First of all, however, it must be an investment in a UK company. However, that investment could take the form of equity or debt.
But then a world of possibility is open. The relevant UK Company can be involved in a very broad range of activities. This includes property development and property investment. Furthermore, it is possible to invest your own Company and still obtain tax relief. As such, this is very different to other investment reliefs such as the Enterprise Investment Scheme.
What’s this got to do with anything? I thought we were talking about the new non dom tax changes? This is all old news. Well, Business Investment Releif was also included as as part of the consultation doc published before Christmas. However, rather than it being part of the crackdown the section on Business Investment Relief were more of a cry for help. The problem being that Business Investment Relief is seemingly a rather unloved relief and nobody appears to be using it.
Personally, I find it incredible that so many advisers, capital raisers and non doms are unaware of this generous relief. It can apply to so many clients in different situations and just requires a bit of ‘thinking outside the box’ to make use of this wonderful relief.
More detail on Business Investment Relief can be found here.
If you or your clients have any queries relation to Business Investment Relief, the non dom tax changes or any other matters then please get in touch.