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Technical updates - Published 18th July 2015

Business Investment Relief For Non-UK Domiciliaries

One thing that seemed to unite all UK political parties at the general election was that non-doms were fair game when it came to raising additional tax revenue. All manner of tax planning opportunities are being eroded, however, one often-underutilised relief remains.

Business Investment Relief is designed to encourage wealthy non-domiciled individuals to invest their wealth in UK businesses. The investment entity has to be a trading and not an investment business, however, investing in commercial property does count. The investment itself can be made by way of subscribing for new shares or loaning funds to a company (it must be a company, even for loans). If the conditions are met, then bringing the money into
the UK will not count as a taxable remittance.

The investment may result in interest or dividends being received. These will be UK source and therefore taxable, as will any gain on the eventual sale of the investment. But, provided the original investment is taken out of the country within 45 days of sale, the remittance itself is still not taxable.

If the non-domiciled individual invests in a qualifying Enterprise Investment Scheme (EIS) company then they can benefit from the 30% income tax relief and the sale of the investment will not be liable to capital gains tax. This can lead to a very advantageous scenario whereby a non-dom can eradicate their UK tax liability without creating a remittance.

For example, if a wealthy non-dom has a UK income tax liability of £300,000 in the year. They can invest £1 million of their offshore funds in an EIS qualifying company. This will eradicate their UK tax liability without creating a taxable remittance. After three years if the company is sold or liquidated or otherwise disposed of, the individual has to transfer their funds outside the UK within 45 days.

This relief is a good way for UK businesses who are looking for investment to make themselves look very attractive.

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