Business
investment relief (BIR) has been a feature
of the UK tax system since April 2012 and it is unusual, being the only
exception to the remittance basis of taxation that is ‘purpose-specific’. BIR allows UK resident non-doms to bring into
the UK untaxed foreign income and foreign gains without making a taxable
remittance of those funds. The purpose
of the relief is to encourage foreign investment into UK commercial
enterprise. However, as reliefs go, it
is relatively unloved. Its uptake since
inception has been limited but, thanks to the Autumn Statement 2015, it is back
in the spotlight again as the Government announced a consultation on altering BIR
to increase its use, with the aim of increasing investment into UK
businesses.
In some
respects, BIR is rather generous. There
is no upper limit on the amount of foreign income and gains that can be brought
in. The funds can be raised by way of a
loan which is repaid using foreign income and gains if preferred. The investment has to be made into an
unlisted company (which need not be a UK company) and the company’s activities
can include (usually) developing or letting property, or research and
development, in addition to trading (or investment into a holding company
investing in these types of company), as long as the activity is being carried
on on a commercial basis. There is no
time limit on how long the investment can be held.
In
other respects, BIR is rather unattractive, though. Although HMRC offers a pre-approval service for
reassurance that BIR applies before a remittance is made, a decision could take
longer to obtain than the 45 day time limit permitted for funds brought into
the UK to be invested in the target company.
The investment can only be by way of a subscription for a new issue of
shares or other securities or by way of loan.
The target company also has to remain qualifying throughout and this
must be continually monitored as, if the company ceases to qualify, a non-dom
will have, in most cases, only 45 days to take the invested funds out of the UK
again or reinvest into another qualifying target company. The relief has to be claimed through a UK tax
return, which will inevitably involve additional information being provided to
HMRC where there may have been no requirement to fill in a tax return
before. In addition, investments into
listed companies or any type of partnership do not qualify for BIR.
The
relief has the potential to be attractive to wealthy resident non-dom
investors. However, the Government’s announcement
sits uneasily with the tightening up of the remittance basis of taxation for
long term resident non-doms ushered in by July’s Summer Budget and on which we
are waiting for more details, now the Government’s consultation on that new
measure has closed. The Government will
need to do more than this to win back the trust of non-dom investors.
And finally
Another year passes!
With it goes a large number of changes, actual and proposed, to the UK
estate planning scene in 2015. There are
sure to be more in 2016, so keep reading!
I’d like to take this opportunity to wish all my readers
here in England and the many of you abroad a very happy and peaceful Christmas and
a prosperous 2016 to come. My next post
will be Thursday 14 January.
