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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Exemptions: Business investment relief: Potentially chargeable events - overview (s809VH ITA 2007)

Foreign income and gains used to make a qualifying investment [see RDRM34330] will become taxable as a remittance if a potentially chargeable event occurs and the appropriate mitigation steps [see RDRM34440] are not taken within the relevant grace period [see RDRM34480]. A potentially chargeable event occurs where:

  • the relevant person who made the investment disposes of all or part of their investment [see RDRM34400] (809VH (1)(b) ITA2007)
  • the company in which the investment was made ceases to be an eligible trading company, an eligible stakeholder company or an eligible holding company [see RDRM34410] (809VH(1)(a) ITA2007)
  • the 2 year start-up rule is breached [see RDRM34430] (809VH(1)(d) ITA2007), or
  • the extraction of value rule is breached [see RDRM34420] (809VH(1)(c) ITA2007).

Share for share exchanges

  • During corporate restructuring, old shares can be disposed of and new shares in the same company, or another company, issued in their place. The disposal of the old shares is a potentially chargeable event. However, provided both the old and new shares are qualifying investments, the exchange will be treated as an immediate reinvestment in a target company and no potentially chargeable event will occur provided a valid claim is made on the appropriate tax return for the year of the share exchange. The new shares are derived from the original foreign income and gains in the same way as the original shares.


Where a target company:

  • enters into administration or receivership, or
  • is wound up or dissolved,

there would in most circumstances be a potentially chargeable event requiring the investor to dispose of the holding. However, where this occurs for genuine commercial reasons, it will not be treated as a potentially chargeable event as it would be impossible, in most cases, for the investor to take the appropriate mitigation steps.

If the investor or any other relevant person receives value as a result of the insolvency process, for example a capital distribution, the appropriate mitigation steps will need to be taken to prevent the foreign income or gains being treated as remitted to the UK.

Example 1

Junaid made a qualifying investment of £500,000 in Bey Motors Limited. Unfortunately Bey Motors is not successful and the company goes into receivership, ceasing trading on the 11 March 2015. At this point there is no chargeable event even though the company has ceased trading; Junaid need take no mitigation steps.

On 5 December 2015 Junaid, as a creditor, receives £40,000 from the disposal of the company’s assets. Junaid will need to take the appropriate mitigation steps to prevent a taxable remittance from occurring.