Income Tax Act 2007 section 809VH

Meaning of "potentially chargeable event"

Section 809VH defines what counts as a "potentially chargeable event" for the purposes of the business investment relief rules, where such an event can lead to previously relieved foreign income and gains being treated as remitted to the UK.

• A potentially chargeable event occurs if the target company loses its eligible status, the investor disposes of all or part of their holding, the extraction of value rule is breached, or the 5-year start-up rule is breached.
• The extraction of value rule is breached when a relevant person receives value attributable to the investment, unless the value is arm's length income received in the ordinary course of business and treated as taxable income.
• The 5-year start-up rule is breached if the target company is non-operational at the end of the 5-year period following the investment, or becomes non-operational at any time after that period.
• An insolvency step taken for genuine commercial reasons will not count as a potentially chargeable event, though any extraction of value connected with the insolvency may still trigger one.