Introduction

Business Investment Relief (BIR) was introduced to encourage non-UK domiciled individuals to invest in the UK. It operates by enabling individuals who have paid tax on the remittance basis to remit foreign income and gains to the UK in order to make a qualifying investment without a tax liability arising on the remittance.

Conditions apply to claim and retain relief. If relief is lost, funds must either be exported or a reinvestment made and a new BIR claim submitted. If neither action is taken, the invested funds will be taxed as remitted.

The remittance basis was abolished with effect from 6 April 2025, though remittances of previously untaxed foreign income and gains from remittance basis years remain taxable. As a transitional measure BIR will remain available on investments made up to 5 April 2028. BIR will then be abolished and no longer claimable, including on reinvestments. Transactions involving companies into which BIR investments have been made will need to be carefully considered.  

Type of investment

• BIR is only available on investments into eligible unlisted private limited companies that, broadly, either carry on a commercial trade and/or invest in other companies that trade commercially.
• Shares listed on the Alternative Investment Market (AIM) are unlisted for this purpose.
• BIR is available on both acquisition of existing and subscription for new shares and securities. It is also available when loans to the company are made which are not securities, provided the loan is new.
• Each draw-down of a loan is treated as a separate investment on which BIR must be claimed.
• BIR is not available on investments into unincorporated businesses or partnerships.
• There is no minimum or maximum remittance which can be invested and qualify for BIR.

Qualifying companies

• BIR is available on investment into unlisted eligible companies that meet certain conditions.
• Eligible investments can be made into trading companies, holding companies of trading groups, companies that invest in trading companies and hybrid companies that both trade and invest in other trading companies.
• In all cases a commercial trade with a view to realisation of profit must be carried on. ‘Commercial trade’ is widely defined for BIR purposes and includes:
  • Letting commercial and/or residential property.
  • Preparing to carry on a trade. Trade must commence within five years of an investment being made.
  • Conducting research and development (R&D) activities from which a commercial trade is expected to derive or benefit. BIR is unavailable if the company’s only activity is preparing to carry out R&D.

BIR may be withdrawn if a company becomes non-operational, or if the company is not yet operational at the date of investment and does not become operational within five years of the investment being made.

No “benefits” related to investment

• Broadly, the investee company and/or group should not provide a non-commercial benefit to the investor or a relevant person (certain relatives, trusts and companies). This applies to benefits received both before and/or after an investment is made.
• If this condition is not met, BIR may be unavailable or withdrawn.

Time limits and claims

• The investment must be made within 45 days of remitting funds to the UK. Notably, if funds are remitted with the intention of subscribing for shares, the shares must be issued within 45 days of the remittance.
• BIR may be available if a remittance is made in order to make an investment that does not go ahead, if the funds are exported within 45 days of remittance and the reason for the remittance can be evidenced.
• If a transaction occurs, including shares or loan notes being exchanged, BIR can be claimed on the reinvestment, provided the reinvestment is made by 5 April 2028.
• The claim deadline is the second 31 January following the tax year of remittance of funds to the UK.
• Claims must be made by the person who would be taxed on the remittance. For example, if an individual paid tax on the remittance basis and gives remittance basis funds to their spouse and the spouse makes a BIR investment, it is the first individual who used the remittance basis who must claim BIR.

Breach of conditions and disposals on investments on which BIR has been claimed

• Broadly, if a BIR investment is disposed of, the investor must either export funds or make a BIR qualifying reinvestment of an amount equal to the lower of the proceeds received and the BIR amount invested.
• There is no exemption for transfers between spouses/civil partners and so these are a disposal for BIR purposes. The amount to export of reinvest is based on the market value of the assets transferred.
• The deadline to export funds or reinvest is 45 days from disposal.
• Investors have two years to dispose of their investment and either export the proceeds or reinvest if the company was either non-operational on investment and did not become operational within five years, or if the company ceased operations within five years (the two-year limit applies from the cessation date).
• Otherwise, if the BIR conditions cease being met, the investor must normally dispose of the investment within 90 days of conditions being breached and have a further 45 days to either export funds or reinvest.
• BIR investments should be closely monitored due to the tight time limits that apply.

Advance clearance procedure

Clearance can sometimes be applied for to obtain HMRC’s view on BIR availability. Detailed information must be provided. HMRC aim to respond within 28 days of receipt of application but are not obliged to do so.

Commercial considerations

Any potential investor should always keep general commercial considerations in mind and take independent investment advice as needed.