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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Exemptions: Business investment relief: Extension of the grace period

The grace period [see RDRM34480] may be extended by an officer of HMRC for either of the reasons below.

Lock-up agreements

A lock-up agreement is a contract which is directly related to the listing of shares in a target company [see RDRM34340] or a new company on a recognised stock exchange. It imposes restrictions on the time or manner in which the investor may dispose of some or all of their holding in the target company or shares they receive in the new company in exchange for their holding in the target company. The contract can be with the target company, the new company or professional advisors retained by the target company or the new company.

For an extension to be granted due to a lock-up agreement the following two conditions must be met.

Condition 1


  • the target company has ceased to be a private limited company by virtue of having some or all of its shares listed on a recognised stock exchange;


  • the target company has become a subsidiary of another company, and
  • the new company is a corporate body some or all of whose shares are listed on a recognised stock exchange (or are to be so listed).

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Condition 2

The individual is unable to comply with an appropriate mitigation step without breaching the terms of a lock-up agreement.

Example 1

Bruce invests £300,000 in a target company in November 2012. After two very successful years of trading the directors of the company decide, in November 2014, to float the company on the London Stock Exchange.

The existing shareholders, including Bruce, are prevented from selling their shares until six months after the flotation date - 31 March 2015 - because of a lock-up agreement.

Bruce’s investment no longer qualifies under the business investment relief provisions when the shares are listed on 31 March 2015 so he must dispose of his investment. Due to the lock-up agreement he cannot dispose of his investment within the appropriate grace period. In these circumstances HMRC would agree to extend the grace period as conditions 1 and 2 have been met.