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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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Remittance Basis: Exemptions: Business Investment Relief: Relevant Events

Business investment relief allows foreign income and gains from years in which a person was taxed on the remittance basis to be treated as not remitted to the UK when money or other property is:

  • used by a relevant person to make a qualifying investment [see RDRM34330], or
  • brought to or received in the UK to be used by a relevant person to make a qualifying investment.

This is called a ‘relevant event’ (s809VA(3) ITA2007). A relevant event is also treated as occurring when:

  • proceeds from the disposal of all or part of a previous qualifying investment are re-invested in another qualifying investment ((s809VL(4)(a) ITA2007)
  • disposal proceeds from the sale of exempt property [see Guidance Note: Changes to the remittance basis] are used to make a qualifying investment (s809YC(5) ITA2007)
  • all or any part of a tax deposit [see RDRM34500] made in relation to the business investment relief is withdrawn by the depositor and used to make another qualifying investment (s809VM(6) and (7) ITA 2007).
Example 1

Dimitri sells a previously exempt property derived from foreign income in the UK. The funds from this sale are credited to one of Dimitri’s offshore bank accounts. Dimitri then gifts £220,000 of the sale proceeds to his wife Natalie who brings the money back to the UK and invests it in a qualifying company [see RDRM34340]. Prior to the business investment relief provisions such a remittance would have been liable to UK tax as Natalie is a relevant person [see RDRM33030] and money derived from foreign income or gains has been brought to the UK (s809L ITA2007).

From 6 April 2012 as long as the funds are used to make an investment in a qualifying company and all the associated conditions are met the £220,000 is not a taxable remittance.  
   
Example 2

Vitas previously invested in a qualifying company using his foreign income and gains and claimed relief. As the company is now well established Vitas decides to sell his share holding and re-invest the funds in a new venture. Vitas re-invests the whole of the funds he receives for his shares in another qualifying company.

As Vitas meets all of the qualifying conditions under the business investment relief, the funds used in the re-investment are not a UK taxable remittance of his foreign income and gains. However any gain on the sale of the original investment is a taxable gain in the UK.