Business Investment Relief (BIR) is a potentially valuable tax relief for UK resident non-domiciled individuals looking to bring funds into the UK to invest in a qualifying trading company without triggering a taxable remittance.

This briefing provides a general overview of BIR and the conditions that must be met to secure the relief.


Foreign income and gains that are brought into the UK by UK resident non-domiciled individuals taxed on the remittance basis will usually be subject to UK tax. However, where such income and gains are remitted to the UK by the individual to invest commercially, no tax charge will arise on those foreign income and gains provided the conditions for BIR are met.

Qualifying Conditions

In order for an investment to qualify for BIR, the following conditions must be met:

  • The investment must be in a qualifying company (referred to as a “target company”, as defined below), not a partnership or Limited Liability Partnership.
  • The investment must be in the form of either a loan (secured or unsecured) to the target company or a subscription for new shares (either preference or ordinary) in the target company. The purchase of existing shares will not qualify.
  • The investment must be made within 45 days of the foreign income or gains being brought to the UK.
  • No benefit attributable to the investment can be obtained (or expected to be obtained) by the investor or a ‘relevant person’, either directly or indirectly. A ‘benefit’ for these purposes is defined below. A ‘relevant person’ includes a spouse/civil partner, child or grandchild under the age of 18, the trustees of a settlement of which the taxpayer or one of the above is a beneficiary, and a close company including its 51% subsidiaries, in which the taxpayer or one of the above is a participator.
  • On the disposal of all or part of the investment (or the repayment of all or part of a loan) the proceeds (up to the amount of the original investment) must be taken outside the UK or reinvested in another qualifying company within 45 days. If a capital gains tax (CGT) liability arises, the taxpayer can use the disposal proceeds to settle that liability if he obtains a certificate of tax deposit within 45 days of the disposal. In this case, the proceeds used to pay the CGT do not need to be taken offshore and will not be treated as a taxable remittance.

Relief is not available if the investment forms part of a scheme or arrangement, the main purpose of which is to avoid UK tax.

Target Company

For a company to qualify as a target company for BIR purposes it must satisfy all of the following conditions:

  • It must be an unquoted company (including Alternative Investment Market (AIM) companies); and
  • It must be a trading company or be preparing to carry on a trade within two years of the date of the investment; and
  • Carrying on a commercial trade must be all, or substantially all, that the company does. The phrase “substantially all” is not defined, but HM Revenue & Customs (HMRC) guidance indicates that where the commercial trade accounts for at least 80% of a company’s total activities, the company will generally be regarded as meeting this requirement.

A holding company may also qualify if it is a member of an eligible trading group (i.e. all companies in the group are unquoted companies and the group as a whole passes the 80% commercial trading test).

For the purposes of BIR, a commercial trade includes any activity that is treated as a trade for corporation tax purposes. This includes farming or market gardening, the commercial occupation of land (but not woodland), the renting or leasing of land or property (both commercial and residential rentals qualify), and research and development activities which are intended to lead to a commercial trade.

Provided the relevant conditions are met, there is no limit to the amount that can be brought into the UK and for which BIR can be claimed.

What is a benefit?

A benefit is anything that would not be provided to the investor (or a relevant person) in the ordinary course of business on an arm’s length basis, or which would be provided but on less favourable terms, or which would not be available at all in the absence of the investment.

A commercial return on the investment is not a benefit and therefore dividends paid out of profits, or interest paid on a loan to the company that any similar investor might reasonably expect to receive, will not be a benefit for these purposes.

The investor can be a director of the company, provided that his salary and benefits are at a market rate for the work carried out.

If a benefit is obtained by the investor or a relevant person, all the original foreign income and gains invested are treated as remitted. The chargeable remittance is not restricted in proportion to the benefit obtained. However, it may be possible to avoid a tax charge if full market value is paid for the benefit or specific action is taken within defined time limits.

Breaching the relevant conditions

Whilst the original investment may qualify for relief, it is possible that certain subsequent events could result in a breach of the conditions. This may happen in any of the following instances:

  • All or part of the investment is disposed of
  • The target company ceases to qualify
  • The extraction of value (benefit) rule is breached
  • The two year start up rule is breached

In the event that a condition is breached, this will give rise to a taxable remittance unless appropriate mitigation steps are taken, and professional advice should be sought.

The onus of proof that relief is due is on the person claiming the relief. Appropriate evidence should therefore be retained.

Time limit for making a claim

A claim for Business Investment Relief must be made on the investor’s self-assessment tax return by the first anniversary of 31st January following the end of the tax year in which the investment, or reinvestment, was made. So, if a qualifying investment or reinvestment is made in 2016/17, the claim must be made by 31st January 2019.

45-day time limit

Where a qualifying investment is not made within the 45-day time limit, the income and gains brought into the UK will be treated as a taxable remittance, unless they are taken offshore before the end of the 45-day period. Where only part of the amount remitted is invested in a qualifying investment, the remainder will be treated as a taxable remittance unless the funds not invested are taken offshore within the 45-day period.

Advance clearance from HMRC

An individual intending to make a commercial investment can ask HMRC for their opinion as to whether it will qualify for BIR.

Other reliefs

In addition to BIR, the investment can potentially also attract other tax reliefs, including:

  • Enterprise Investment Scheme (EIS) Relief (income tax relief at 30% on up to £1 million of investment and CGT exemption/deferral relief).
  • Seed EIS Relief (income tax relief at 50% on up to £100,000 of investment and CGT exemption/reinvestment relief).
  • Venture Capital Trust Relief (income tax relief at 30% on up to £200,000 of investment and CGT exemption).
  • Entrepreneurs’ Relief (effective 10% rate of CGT on up to £10 million of lifetime gains).
  • Business Property Relief (IHT exemption after investment held for two years).


For non-domiciliaries looking to take advantage of Business Investment Relief, care needs to be taken to ensure that the investment conditions are not breached either by the investor or the company throughout the lifetime of the investment, and that if a disposal occurs, the proceeds are either reinvested or taken offshore within the relevant time limits. Specialist advice should be sought in all cases.