RDRM34330 - Remittance Basis: Exemptions: Business Investment Relief: Qualifying investments - overview
Source: gov.uk (2025-04-07)


Overview (#Overview)

Loan arrangements (#Loan arrangements)

Investment by nominees (#Investment by nominees)

Overview

A qualifying investment (section 809VC ITA 2007) can be made by either:
- obtaining newly issued shares in
- making a loan (secured or unsecured) to
a target company (see RDRM34340 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34340)).

From 6 April 2017 an investment can also be made by acquiring existing shares in a target company.

The shares and rights under a loan forming the subject of the investment are referred to as “the holding”.

To qualify for relief the investment must meet two qualifying conditions - Conditions A and B (see RDRM34340 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34340) and RDRM34360 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34360)).

Shares may be ordinary or preference and the reference to shares includes any securities that may be held in the target company (section 809VC(6) ITA2007).

From 6 April 2025 foreign income or gains that have been used to make qualifying investments are eligible to be designated under the temporary repatriation facility (TRF) (see RDRM71000 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm71000)). However, it is not possible to make a qualifying investment using TRF capital (see RDRM75100 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75100)) that has been designated before being invested or re-invested. Investments made with TRF capital will be treated as non-qualifying investments for the purposes of the business investment relief (BIR) rules – see RDRM74760 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74760) for guidance and examples.

From 6 April 2028 there can be no new qualifying investments, whether these are brand new investments in the business or re-investments as mitigation steps (see RDRM34440 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34440)).

Example 1a

Lydia, a remittance basis user, makes an investment of £50,000 of her foreign income in a target company on 30 March 2017. In exchange for the investment the company director transfers 100 of his shares in the company to Lydia. This is not a qualifying investment as Lydia has obtained shares that were originally issued to somebody else and are not newly issued to her.

Example 1b

The scenario is exactly the same as example 1a, but instead the investment is made on 7 April 2017. This would be a qualifying investment and so qualify for BIR.

Example 2

On 6 April 2026 Mei, a former remittance basis user, acquires shares to the value of £350,000 in a UK company using her 2022-23 foreign gains and claims BIR on the investment. To note, Mei has not designated those foreign gains under the TRF. She has no other investments in the company or group.

On 30 October 2029 Mei makes a loan of £250,000 to the same UK company using her 2023-24 foreign gains (which she also did not designate under the TRF). Mei is unable to claim BIR on the loan and therefore she has a remittance of £250,000 in 2029-30 when she transfers the funds to the UK company, which is taxable at the usual rates. As she still has a qualifying investment in the company, which she made in 2026-27, the loan is a non-qualifying investment for the purposes of the BIR rules.

Loan arrangements

Where a relevant person enters into a loan agreement which authorises the company to draw down separate amounts over a period of time, the individual cannot claim BIR on the entire loan on the basis of the agreement. Instead, each amount drawn down is treated as a separate loan and a separate investment. (section 809VC(7) and (8) ITA 2007).

Where interest is paid to the investor, those payments are liable to UK Income Tax subject to the usual rules. If any of the capital is repaid it must be taken offshore within the grace period (see RDRM34480 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34480)) or be treated as a remittance.

Example 3

William is a remittance basis user who decided to use some of his foreign income to make a qualifying investment in a target company, Company A. He makes his investment in the form of a £1 million loan.

On 1 March 2013 a loan agreement is signed. Company A draws down an initial instalment of £250,000 on 31 March 2013. The balance of the loan remains offshore. Company A subsequently draws down the following amounts:

£100,000 on 12 August 2013

£250,000 on 21 September 2013

£150,000 on 21 April 2014

£250,000 on 29 December 2015

Each of the separate drawdowns has been invested in Company A within 45 days of bringing the money to the UK. The funds are treated as not remitted to the UK, provided William makes claims for the relief for the initial and subsequent instalments. For example William will have to make a claim for the initial instalment by 31 January 2015.

In this example, William made the following loans to the target company:

£250,000 in 2012-2013

£350,000 in 2013-2014

£150,000 in 2014-2015

£250,000 in 2015-2016

He will need to make further claims to relief for each of these tax years on his Self Assessment tax return.

It is possible for a qualifying investment to be made in a close company which is itself a relevant person (see RDRM33030 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm33030)0. In such cases, where the company subsequently uses the invested funds in the UK, for example to purchase stock or to pay employees, the foreign income and gains will not be treated as a taxable remittance, provided they are not used in a way which would itself be a potentially chargeable event (see RDRM34390 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34390)).

Investment by nominees

Sometimes investments are made in qualifying companies via nominees rather than directly by a relevant person. Strictly this would mean the investment failed to qualify for BIR as the investment must be made by a relevant person (section 809VA(3)(a) ITA 2007). However, HMRC will not reject a claim to BIR in cases where a relevant person subscribes for shares in a qualifying company through a nominee, provided that relevant person is able to demonstrate they have beneficial ownership of those shares and that all of the other conditions for the relief are met.