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Business Investment Relief

05 September 2019

Business Investment Relief (BIR) gives relief from tax under the remittance basis for non-UK domiciled taxpayers resident in the UK who bring funds to the UK to make qualifying investments. Income or gains are not treated as remitted where the funds are invested within 45 days of being brought to the UK. There is no annual or lifetime limit.

Qualifying investments

The investment must take the form of a subscription for, or acquisition of, shares or securities (hereafter ‘shares’) of the target company or a loan (whether secured or unsecured) to that company. Two conditions must be satisfied.

  1. Target company must be an eligible company

The first condition is that the target (investee) company is not listed on a recognised stock exchange (though it may be quoted on an exchange-regulated market such as AIM) and is one of the following:

  1. An ‘eligible trading company’ – ie is carrying on one or more commercial trades (or is preparing to do so in the next five years), and carrying on commercial trades is substantially all of what it does (or is reasonably expected to do once it begins trading). HMRC normally takes ‘substantial’ to mean 80% or more. A company will not qualify as a trading company if the trade is carried on by a partnership in which it is a partner.
  2. An ‘eligible stakeholder company’ – ie it exists wholly for the purpose of making investments (either shares or loans) in eligible trading companies (ignoring any minor or incidental purposes), and it holds one or more such investments, or is preparing to do so within the next five years.
  3. An ‘eligible hybrid company’ – ie where it does not qualify under 1 or 2, it carries on one or more commercial trades (or is preparing to do so within the next five years) or it holds one or more investments in eligible trading companies or is preparing to do so within the next five years. To qualify, the carrying on commercial trades and/or making investments in eligible trading companies must constitute substantially all of what it does (or is reasonably expected to do once it begins operating).
  4. An ‘eligible holding company’ ie it is a member (not necessarily the parent) of an eligible trading group (or, broadly, of a group that is reasonably expected to become an eligible trading group within the next five years), and
    • An eligible trading company in the group is a 51% subsidiary of it, and
    • Where the ordinary share capital that it owns in the eligible trading company is owned indirectly, each intermediary in the series is also a member of the group.

For these purposes, ‘trade’ includes a property development or rental business and certain preliminary activities.

  1. The related benefits condition

The second condition is that neither the taxpayer nor any ‘relevant person’ (such as a spouse, minor child or grandchild, or related trust or company) has obtained, or become entitled to obtain, any benefit that is directly or indirectly attributable to the making of the investment (or any benefit that it is reasonable to assume would not have been available in the absence of the investment).

Withdrawal of the relief

If at any time, the investor sells the investment or another ‘potentially chargeable event’ subsequently occurs, the original tax relief can be withdrawn unless the funds are re-invested quickly in another qualifying company or other ‘mitigation step’ is taken with a specified time. This is achieved by treating the amount of the investment (or the relevant portion if the event does not affect the whole investment) as remitted to the UK at the end of the ‘grace period’ (see below).

A ‘potentially chargeable event’ includes:

  • The taxpayer disposes of all or part of the investment
  • The investee company ceases to be an eligible trading, stakeholder, hybrid or holding company
  • Value is received by or for the benefit of the taxpayer or a relevant person from any person, in circumstances that are directly or indirectly attributable to the investment (normal arm’s length payments such as dividends, loan interest or salary are excluded) or
  • The investee company breaches the ‘five-year start-up rule’ (ie the company remains non-operational five years after the investment was made).

Events do not count as potentially chargeable events if, broadly, they are due to bona fide formal insolvency procedures. However, the extraction of value in connection with the insolvency procedures will still count as a potentially chargeable event.


If the potentially chargeable event is a disposal of all or part of the holding, or if value is extracted in connection with the dissolution of the target company, a charge will not arise if the whole of the proceeds are taken offshore or reinvested in the same or another qualifying company (within the grace period).

For other potentially chargeable events, there will be no tax charge if the investor also disposes of the entire holding in the target company and reinvests all the proceeds or takes them offshore again, within the grace period).`

The grace period

Where the potentially chargeable event is one that requires the investor to dispose of his holding, the proceeds must be taken offshore or reinvested within a ‘grace period’ of 90 days, normally beginning when the investor became aware, or ought reasonably to have become aware, of the event (or, in the case of extraction of value, from when the value is received).

After a disposal (or an extraction of value in connection with a winding up) there is a grace period of 45 days for the proceeds to be taken offshore or reinvested, beginning when the proceeds first become available to the investor. This applies whether the disposal is itself the potentially chargeable event or is the required mitigation step in relation to another such event. The period may be extended in exceptional circumstances.

Further UK tax reliefs

The UK operates a number of other tax incentive schemes to encourage business investment and it is possible for a non-UK domiciled individual to qualify for these reliefs as well as BIR. For example, a direct investment in a UK start-up company may also qualify for initial 50% income tax relief and capital gains tax (CGT) relief under the Seed Enterprise Investment Scheme. Similarly, an investment in a company that is less than 7 years old may qualify for the Enterprise Investment Scheme giving 30% income tax relief and CGT relief. If a longer term investment in a business does not qualify for these reliefs, it may still qualify for a lower than usual rate of CGT on disposal under the Investors’ Relief rules.


Business Investment Relief provides a valuable incentive for investment in unlisted UK companies. However, it may also expose taxpayers to risks that need to be managed: if relief is given and subsequently withdrawn (for reasons beyond their control), taxpayers will need to act promptly to ensure that they will not be taxed on the resulting remittance. The relief is therefore perhaps most attractive to taxpayers who can expect to exercise a significant degree of control over the companies in which they invest.

How can we help?

BDO offers a comprehensive set of services including help and advice for individuals on how to structure assets and business interests before coming to the UK, and on how to manage their tax affairs once they become UK resident. We have assisted a number of individuals to make the most of Business Investment Relief and will be happy to explore how we can help you.

Contact us