The Finance Bill 2012 included the proposed legislation on business investment relief for remitted foreign income and gains. Under pre-6 April 2012 rules, remittance basis taxpayers are liable to UK tax on any foreign income or capital gains which they remit to the UK, irrespective of the purpose for which the income and gains are used.

The relief is a welcome initiative under which UK resident non-domiciled persons will be able to remit overseas income and gains to the UK tax-free in respect of certain qualifying business investments in the UK, including in companies in which they or their associates are involved.

In order to qualify for the business investment relief the following main conditions must be met:

  • the investment must be in a qualifying company (the 'target company') which meets the eligibility conditions
  • the investment may be in the form of shares or loans
  • the investment must be made within 45 days of the foreign income or gains being brought to the UK
  • no benefit can be received by a relevant person, attributable to the investment
  • a claim is made on the self-assessment tax return for the year in which the investment is made
  • on disposal of the investment the proceeds of sale up to the amount of the investment must be taken offshore or reinvested in another qualifying investment within 45 days.

There is no constraint on the amount that can be brought to the UK and on which business investment relief is claimed.

Business investment will also potentially attract other existing tax reliefs, provided the qualifying conditions for these reliefs are met, such as:

  • Enterprise Investment Scheme (EIS) relief
  • Venture Capital Trust relief
  • entrepreneurs' relief
  • business property relief
  • the new Seed EIS relief.

The business investment relief is potentially very valuable commercially in allowing people to utilise offshore resources which have previously been ring-fenced from remittance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.