Business Investment Relief (BIR) is a relief available to UK resident but non domiciled (or deemed domiciled) individuals which allows them to remit foreign income and gains to invest in UK companies without triggering a UK tax charge.
BIR will apply where an individual
A claim for relief must be made by the first anniversary of 31 January following the tax year of remittance e.g. Investment made in the year ended 5 April 2023, claim by 31 January 2025.
Advance assurance that an investment will qualify for BIR can be made to HMRC and is advisable where time permits.
To be a qualifying investment, the target company must be a private limited company whose shares are not traded on a recognised stock exchange.
Investments in AIM companies are okay.
The target company must be:
These are all specifically defined, and all make reference to an “eligible trading company”.
An 'eligible trading company' is a private limited company which carries on one or more commercial trades (or this is substantially -HMRC suggest 80% - what the company does) or is preparing to do so within five years.
The meaning of 'trade' is relaxed for these provisions. Specifically, property businesses (including residential letting businesses) are considered a trade for BIR.
Investment in a Limited Liability Partnership or as a sole trader will not qualify. Also, a company that is a partner in a partnership will not to be regarded as carrying on a trade carried on by the partnership.
The investment can be made by a “relevant person” via:
Where a loan is drawn down in tranches, each tranche will be treated as a separate loan and investment
A “relevant person” includes:
Where relief has been granted, a remittance may be brought back into charge where there has been a
The effect of this is that the income and gains are treated as having been remitted to the UK at the end of the relevant grace period.
A “Potentially chargeable event” occurs when :
When a potentially chargeable event occurs, if appropriate mitigation steps are taken within a prescribed time limit, called a ‘grace period’, a taxable remittance can be avoided.
This grace period is 45 or 90 days depending on the type of potentially chargeable event.
Mitigation occurs when the income or gains are taken offshore or reinvested in a qualifying investment within the specific time limits.
In ‘exceptional circumstances’ HMRC may agree to extend the time limits for carrying out the mitigation steps.
There are also rules which allow some funds to be retained to settle a tax liability in very specific circumstances.