皇冠体育app

皇冠体育app Business Investment Relief (BIR) legislation introduced on 6 April 2012 has been updated. 皇冠体育appse changes came into force on 6 April 2017.

Qualifying investments

A qualifying investment can now be made by acquiring existing shares in a target company.

New category of qualifying target company

Eligible hybrid company has been added to the target company list.

An eligible hybrid company is a private limited company which:

• is not an eligible trading or stakeholder company
• carries on one or more commercial trades or may do so within the next 5 years
• holds one or more investments in eligible trading companies or may do so within the next 5 years
• carries on commercial trades and makes investments in eligible trading companies for all, or substantially all, of what it does

Non-operational meaning

For eligible hybrid companies, non-operational means, either:

• it鈥檚 not trading, and it holds no investments in any eligible trading companies
• none of the eligible trading companies it holds investments in are trading

Commercial trade

A new requirement that trade should be commercial, that is, conducted on a commercial basis with a view to making profits. Whether carrying on a commercial trade is all or substantially all of a trading company鈥檚 activities will depend on a consideration of all the relevant facts.

皇冠体育app phrase 鈥榓ll or substantially all鈥� is not in the legislation, but if the relevant trade accounts for at least 80% of the companies total activities, it will generally be regarded as meeting this requirement.

Read about 鈥榳hat is a trade鈥� in the Business Income Manual 鈥� Meaning of trade.

Partnerships

A company which is a partner in a partnership will not be regarded as carrying on a trade if the trade is carried on by the partnership.

As the commercial trade test conditions will not be met the company will not qualify for BIR.

To qualify for BIR the company must:

• have commercial trade in its own right separate from the partnership
• satisfy the other qualifying conditions

Potentially chargeable events

When a qualifying investment is made, situations might arise which are treated as a potentially chargeable event.

A potentially chargeable event is when the:

• relevant person who made the investment disposes of all or part of their investment
• company in which the investment was made ceases to be an eligible:
  • trading company
  • stakeholder company
  • holding company
  • hybrid company
• 5 year start up rule is breached
• extraction of value rule is breached

When a potentially chargeable event occurs the investor has time limits to take the appropriate mitigation steps. 皇冠体育appse time limits are called grace periods.

Grace periods

皇冠体育appre are 4 grace periods. Numbers 1 to 3 are unchanged. Number 4 has been updated from 6 April 2017.

1. Disposal of all or part of the holding

45 days to take the disposal proceeds offshore or reinvest them, beginning on the day on which the disposal proceeds become available to the relevant person

皇冠体育app disposal proceeds up to amount 鈥榅鈥� (read about amount 鈥榅鈥� in section 4 鈥� Breach of the 5 year start up rule), must be taken offshore or reinvested to successfully carry out the mitigation steps.

2. Extraction of value

90 days to dispose of the holding, beginning on the day on which value is received.

45 days to take the disposal proceeds offshore or reinvest them, beginning on the day on which the disposal proceeds become available to the relevant person.

皇冠体育app disposal proceeds up to amount 鈥榅鈥� (read about amount 鈥榅鈥� in section 4 鈥� Breach of the 5 year start up rule), must be taken offshore or reinvested to successfully carry out the mitigation steps.

3. Ceasing to be an eligible company

90 days to dispose of the holding, beginning on the day on which a relevant person becomes aware, or ought reasonably to have been aware, of the potentially chargeable event.

45 days to take the disposal proceeds offshore or reinvest them, beginning on the day on which the disposal proceeds become available to the relevant person.

皇冠体育app disposal proceeds up to amount 鈥榅鈥� (read about amount 鈥榅鈥� in section 4 鈥� Breach of the 5 year start up rule), must be taken offshore or reinvested to successfully carry out the mitigation steps.

4. Breach of the 5 year start up rule

2 years to dispose of the holding and to take the disposal proceeds offshore or reinvest them.

皇冠体育app 2 years begin on the day the relevant person becomes aware, or ought reasonably to have been aware, of the potentially chargeable event.

皇冠体育app disposal proceeds up to amount 鈥榅鈥�, must be taken offshore or reinvested to successfully carry out the mitigation steps.

If payments are received in instalments, each payment is considered to be a separate disposal and each will trigger the start of a grace period.

Amount X is calculated as:

• the sum originally invested, less
• any part of that sum that has previously been:
  • treated as remitted to the UK
  • sent offshore or invested in another qualifying investment
  • used to make a tax deposit on a previous part disposal

If the disposal proceeds exceed amount X, the individual has only to take offshore or reinvest amount X.

皇冠体育app extraction of value rule

This rule is breached if the relevant person receives value from a company that is directly or indirectly linked to the investment they make. An extraction of value can be either money or money鈥檚 worth received by or for the benefit of any relevant person.

If a breach occurs, the taxpayer will be treated as having made a taxable remittance of all of their foreign income or gains invested unless they take the appropriate mitigation steps (read 鈥榞race periods鈥� in section potentially chargeable events).

Any payment received for a disposal which is a potentially chargeable event is not treated as a breach of the extraction of value rules where the value received by the relevant person is:

• subject to Income Tax or Corporation Tax or would be if the relevant person were liable to such tax
• paid or provided to the relevant person in the ordinary course of business and on arm鈥檚 length terms

Investments made before 6 April 2017, where the extraction of value event occurs after 6 April 2017, will continue to be treated under the old rules.

For more information read Remittance Basis and Domicile Manual 鈥� Appropriate mitigation steps).

Changes from 6 April 2017

For investments made from 6 April 2017 the extraction of value rule will only be breached if the relevant person receives value in circumstances that are directly or indirectly attributable to their investment and they fail to take the appropriate mitigation steps (read 鈥榞race periods鈥� in section potentially chargeable events).

This means that an extraction of value event with the same facts could have different outcomes if it occurred before or after 6 April 2017.

Disposal of all or part of a holding

If an investor disposes of some or all of their holdings in an eligible hybrid company, as well as any of the 3 existing eligible company categories they have to take the appropriate mitigation steps, (read 鈥榞race periods鈥� in section potentially chargeable events), so that the foreign income or gains that was originally invested is not treated as remitted to the UK.

Two year start up rule

Before 6 April 2017 if you invested in a target company that had not started trading, to meet condition A in the Deemed Domicile rules for BIR the company:

• must start trading within 2 years of the investment being made
• must not become non-operational after the end of the 2 year period

From 6 April 2017 the start-up period has been extended to 5 years for both trading purposes and if a company becomes non-operational. 皇冠体育app investment must be made on or after 6 April 2017.

For investments made before 6 April 2017 the 2 year start-up condition will continue to apply.