Skip to content
Solved

RDRM34358 | Remittance basis: Exemptions: Business investment relief Condition A: eligible hybrid company

From HM Revenue & Customs · Remittance Basis and Domicile Manual

From 6 April 2017, a new category of qualifying target company has been added – an eligible hybrid company.

An eligible hybrid company is a private limited company which:

  • Is not an eligible trading company or an eligible stakeholder company

  • Carries on one or more commercial trades, or is preparing to do within the next 5 years

  • Holds one or more investments in eligible trading companies, or is preparing to do within the next 5 years

  • Carrying on commercial trades and making investments in eligible trading companies are all, or substantially all of what it does, (or what it is reasonably expected to do once it begins operating).

Example

Marcia has resided in the UK for 10 years and is assessed on the remittance basis. She wants to invest some of her foreign income and gains within the UK.

An investment opportunity has been recommended in an up and coming private limited company, which is looking for additional funds to expand its business.

The company receives rental income from a portfolio of properties in North West England. As well as using the profits from this trade to invest further in the property market, from 2013 the company has sought to diversify and has loan investments in a construction company that specialises in building apartment blocks in Manchester.

Marcia invests £250,000 in the company in October 2017, using her foreign income and gains. The company meets the criteria of an eligible hybrid company and so Marcia can claim BIR on the full £250,000.

This is because the company is a private limited company and is not simply an eligible trading company or simply an eligible stakeholder company. Furthermore, it carries on a commercial trade and holds investments in an eligible trading company, and its commercial trades and investments in the eligible trading company are all that the company does.

If Marcia had made the investment prior to 6 April 2017, it would not have been a qualifying investment for BIR purposes, because the company was both a trading and stakeholder company.