Monday, March 27, 2017

Non doms: BIR rules relaxed

Business Investment Relief (BIR) is a very attractive relief for non domiciled persons who have untaxed earnings or mixed funds abroad and who wanted to invest in the UK.

It is used a lot in conjunction with EIS or SEIS investments allowing people to bring in untaxed earnings without being taxed under the remittance basis and at the same time benefit from the tax relief provided by such schemes. New legislation included in Finance Bill 2017 now makes the BIR scheme even more flexible for any investment made on or after 6 April 2017. Here are the changes:
  1. The definition of a qualifying investment will be extended to the acquisition of existing shares and not just newly issued shares in a target company.
  2. Where the target company is preparing to trade or hold trading investments, the period during which it must actually do so will be extended from 2 to 5 years.
  3. The definition of a qualifying investment will be extended to include a hybrid company, i.e. one that both trades and holds investments in trading companies (or is preparing to do so within the next five years).
  4. It will be made clear that for BIR purposes a corporate member of a partnership is not to be regarded as carrying on the trade of the partnership (HMRC already believe this to be the case but current legislation was not clear).
  5. Where the target company becomes non-operational at any time after the end of the two years (to be increased to five years) after the investment was made, a chargeable event occurs, ie the relieved income or gains are treated as then remitted to the UK. However, an investor is given a period of grace in which to take mitigating steps, which means disposing of the investment and either taking the proceeds offshore or using them to make another qualifying investment. The period of grace will be extended so that it does not end until two years after the investor becomes aware (or ought reasonably to have become aware) that the target company has become non-operational.
  6. Currently a chargeable event occurs if an investor receives any value (in money or money's worth) directly or indirectly from the target company or any company associated with it, whether or not the benefit is connected to the investment. This rule will be amended so as to apply where value is received from anyone in circumstances directly or indirectly attributable to the investment.
You can find more details at https://www.gov.uk/government/publications/non-domicile-taxation-business-investment-relief.