Income Tax Act 2007 section 809VL

Effect of taking appropriate mitigation steps within grace period

Section 809VL explains what happens when a remittance basis user disposes of a qualifying business investment and takes the appropriate corrective steps (either moving the proceeds offshore or reinvesting them in another qualifying investment) within the permitted grace period, thereby avoiding the disposal being treated as a taxable remittance.

• Where disposal proceeds are taken offshore within the grace period, they lose their protected status — any future bringing of those proceeds (or anything derived from them) into the UK will be treated as a taxable remittance at that later time.
• Where disposal proceeds are reinvested in a new qualifying investment within the grace period, the underlying foreign income or gains continue to be treated as not remitted to the UK, and the business investment relief rules apply to the new investment just as they did to the original one.
• If the amount reinvested exceeds the minimum required, the reinvestment is split into two notional investments — only the portion equal to the minimum required amount benefits from the business investment relief provisions.
• A fresh claim for business investment relief must be made for any reinvestment by the first anniversary of 31 January following the tax year of reinvestment; failure to do so means the original investment is treated as a taxable remittance as if no corrective steps had been taken.