The proposed changes to the Business Investment Relief ("BIR") scheme are welcomed but more could have been done to encourage greater take-up of the scheme and more investment in UK businesses.
Nimesh Shah, partner at Blick Rothenberg, said: “As part of the non-domicile reforms, the current rules regarding BIR will be relaxed, but it was hoped the government would have gone further to encourage greater take-up of the scheme and more investment in UK businesses.”
BIR was introduced in April 2012 to encourage greater investment in the UK by non-domiciled individuals. Whilst the government has proclaimed over £1.5 billion has been invested under the scheme, the general view has been that the existing rules are complex and can unknowingly result in taxable remittances because of the broad ranging anti-avoidance provisions.
The BIR rules, published on 5 December, will be relaxed to allow for the following:
- A ‘hybrid’ company, being both a trading company and stakeholder company, will be a qualifying company for BIR purposes – currently, the company has to be one or the other to qualify.
- The time limit for investing in a company before it starts to trade will increase to five years (it is currently two years).
- A qualifying investment will include the acquisition of existing shares, and not just be limited to the subscription of new shares.
- The ‘grace period’ for a potentially chargeable event will be extended to two years (it is currently 90 days and the monies must be taken outside the UK within 45 days).
Nimesh commented: “Whilst these relaxations to BIR are welcomed, it was hoped the government would go further by widening the regime to permit investment in partnerships and quoted companies, and also by offering incentives for monies to remain in the UK if they had been invested for a certain timeframe.
“Further incentives need to be offered to use the scheme. It is disappointing that the government continues to prevent investment in partnerships, because of a perception that such structures are only used for tax avoidance. Many new businesses will operate through an unincorporated form to start with and the BIR provisions should recognise this.”
He added: “The government has indicated that it will monitor and re-consider the use of BIR, so some of these suggestions could be adopted in the future.”
For more information, please contact Nimesh Shah at firstname.lastname@example.org