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19 April 2020
Business Investment Relief
Introduction I decided to update this article as Business Investment Relief is something I have spoken to clients about quite a few times in recent weeks.
The relief, for the UK resident non-domiciled individuals for whom it is relevant, might be a useful option if they are:
Indeed, Business Investment Relief was introduced following the financial crisis to promote investment in the UK by enabling UK resident non-domiciled individuals to invest overseas income and gains.
Without the relief, these funds would otherwise remain untapped from the perspective of the UK economy.
For Business Investment Relief to apply, the following conditions must generally be satisfied:
It is possible to obtain clearance from HMRC that a proposed investment qualifies for the relief.
The investment must take place within 45 days of remitting the income or gains into the UK.
For the relief to apply, an investor must claim this relief through their tax return, in line with the usual conditions and applicable dates for filing a return.
If an investor is unsure whether their investment will qualify for Business Investment Relief, there is a mechanism whereby investors can seek clearance from HMRC. We have found this team to be incredibly helpful over the years as they try and encourage uptake of the relief.
The relief is a mutually exclusive relief and therefore, there is nothing to prevent an investor claiming other reliefs, such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) alongside.
Any investments made within the UK, with overseas income or gains and by a non-domiciled resident, must be carefully considered and planned, otherwise investors could unintentionally fall into the UK tax net.
Inheritance Tax (“IHT”)
The basic position is that any investments made in the UK will fall into the tax regime for inheritance tax and therefore, depending on the size of investments may be subject to 40% tax on the investments in the UK, above the £325,000 nil-rate band. However, depending on the nature of the investment(s), there may be applicable reliefs such as Business Property Relief and Agricultural Property Relief that may apply, subject to satisfying other conditions. As a result, investors should take advice so as to ensure funds are invested in a tax efficient manner.
Potentially Chargeable Events (PCE)
On the crystallisation of certain events, the relief will be disapplied and therefore, the income or gains remitted to the UK, will be taxable under the remittance basis.
These events are:
Business Investment Relief is an incredibly attractive relief. It is not narrowly defined at will apply to most types of commercial activity in the UK.
As such, in these difficult times, the ability to make a pot of overseas income and gains work hard in the UK might be a boost that can really make a difference.
If you, or your client, has any queries regarding Business Investment Relief or other non dom tax issues then please do not hesitate to get in touch.