By Clare Munro, Tax Partner
Although sterling seems to have regained some ground since hitting a three-decade low in the aftermath of the referendum result, foreign holidays this summer are still likely to be more expensive than we might have expected. For inbound investors to the UK, however, it may be a good opportunity to pick up a bargain. We’ve already seen one example with the SoftBank acquisition of ARM announced this week, but for those with rather less than £24bn to spend, the tax system might just be able to help.
People who live in the UK but have stronger ties elsewhere are generally treated as non UK domiciles (or non-doms for short) and, for the first 7 years of UK tax residence, are able to elect to keep overseas income and gains out of the U.K. tax net without suffering additional charges. Provided that they do not remit overseas income to the UK they are only taxed on their UK source income.
Non doms usually find it relatively easy to live on their capital or taxed UK income in the early years of UK life but have difficulty once their pre arrival capital is used up or when they want to make significant investments in the UK. Business Investment Relief is designed to enable non doms to bring in offshore income or gains in order to invest in business. Under this scheme non doms are given a 45 day window to invest imported income into a company without that income being treated as a taxable remittance. As you'd expect, trading companies are eligible for this type of investment but, perhaps surprisingly, companies which generate profit from land are also eligible. The amounts that can be invested in this way are unlimited and the funds can be kept onshore indefinitely.
Better still, if the investment is into a trading company and meets the conditions, Business Investment Relief can be combined with EIS and SEIS to give income tax relief on the investment, effectively providing two reliefs on the same funds.
So for non-UK domiciles holding a stronger currency abroad and able to treat the current fall in the value of sterling as an opportunity to buy investments at a discount, it is worth reviewing the tax position to see if Business Investment Relief can be used to avoid UK tax on a remittance of income. As with all tax reliefs there are detailed rules, including the possibility of a claw back of relief in certain circumstances, so detailed advice and a review of your specific circumstances is always recommended.
For further information on anything in this article, please speak to your contact partner or to our tax partner, Clare Munro firstname.lastname@example.org.