Business Investment Relief Reforms | KPMG | UK
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Draft Finance Bill 2017: Business Investment Relief Reforms

Business Investment Relief Reforms

Business Investment Relief will be reformed from 6 April 2017 to make it more attractive to non-UK domiciled investors.


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Who should read this? 

Non-UK domiciled individuals who are resident in the UK and are now thinking of investing in the UK.

Summary of proposal 

Business Investment Relief (BIR) will be reformed from 6 April 2017 with the objective of making the BIR scheme more attractive to non-UK domiciled investors.  

BIR was introduced in 2012 permitting non-UK domiciled individuals to remit funds to the UK for qualifying investment purposes without otherwise creating a taxable remittance.  

From 6 April 2017, BIR will be extended to include investments made in a new qualifying entity, a “hybrid company”.  Broadly this is a company which is not exclusively a trading company or a stakeholder company (a company investing in trading companies), which qualify under the established BIR rules, but rather is a hybrid of the two.

At the same time, for a BIR investment to qualify, the period during which an eligible trading company must start to trade, an eligible stakeholder company must start to hold investments in eligible trading companies, or a hybrid company must similarly qualify as such, will be increased to five years. 

Where a company becomes non-operational and a BIR investment ceases to qualify, the grace period during which action must be taken to manage the risk of a tax charge otherwise arising will be increased to two years from the date the investor became aware of the fact the company is not operational.  

Another extension to BIR sees acquisitions of existing shares already in issue potentially qualifying for BIR from 6 April 2017; there will be no requirement for shares to have been newly issued as was previously the case.

Rules which withdraw BIR will be narrowed such that they will only apply where an individual (or relevant person) receives value from any person in circumstances which are directly or indirectly attributed to the investment.  This removes the provision whereby any value received from an involved company, even where such value is not attributed to the individual’s investment, could otherwise see BIR withdrawn.  

Finally, BIR continues to be denied in respect of investments made in partnerships.  Although HMRC policy has been to deny BIR claims in connection to investments made in corporate partners of partnerships, the legislation has been expanded to now explicitly exclude corporate partners from the BIR rules.  

HMRC have stated their intention to continue reviewing other potential reforms proposed as part of the consultation, with a view to further extending the application of BIR in the future.  


6 April 2017

Our view 

BIR is commonly utilised by non-UK domiciled individuals, and the amendments set out above are welcomed and should support the Government’s intention to make BIR more attractive to potential investors.  However these amendments, whilst helpful, could go further and broader reforms would still be beneficial to see a more substantial increase in uptake of BIR, as the Government strives to demonstrate that the UK is ‘open for business’.  For example, an investment in a company which lists will currently cease to qualify for BIR.  An extension to BIR preventing withdrawal of relief where businesses are successful would remove a number of complexities and support a broader growth strategy for the economy.  

Mike Walker 

+44 (0)20 7311 8620


Gavin Shaw

+44 (0)20 7694 4667

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