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RDRM34450 | Remittance Basis: Exemptions: Business investment relief: Disposal proceeds

From HM Revenue & Customs · Remittance Basis and Domicile Manual

What are disposal proceeds?

Disposal proceeds are

  • the consideration for the disposal

  • less any agency fees deducted from those proceeds. (s809Z8 ITA2007)

Agency fees

Agency fees are defined as fees or other incidental costs of a disposal deducted from the sale proceeds before they are paid to the seller.

Example

Joanne has decided she will sell the shares she purchased using £7,250,000 of her foreign income. She appoints an agent to act for her. The agent sells the shares for £8,000,000 and charges £50,000 in professional fees.

£7,950,000 is credited to Joanne’s bank account after the sale (£8,000,000 minus £50,000 agency fees). Joanne has to take the amount originally invested (£7,250,000) offshore or reinvest it within the grace period to prevent a taxable remittance of the foreign income she used to buy the shares.

The agency fees reduce the disposal proceeds and not the amount to be taken offshore. However, if the sale proceeds are less than the amount invested only the net amount received from the sale must be taken offshore or reinvested. In the example above, if the shares had been sold for £7,000,0000 and Joanne had received a net £6,950,000 it is only the net amount received that must be taken offshore or reinvested.

Fees or other incidental costs that are charged by another relevant person are not treated as agency fees. This exclusion does not apply to the extent that the fees or costs:

  • relate to a service actually provided by the relevant person,

  • do not exceed the amount that would be charged if the service were provided on commercial arm’s length terms. (s809Z8(6) and (7) ITA2007)

Non-monetary disposal proceeds

In most cases, the consideration received for the sale of a qualifying investment will be in monetary form. If other property or benefits are received the value of the disposal proceeds will be the market value of the property received at the time of the disposal. (s809Z8(3) and 809Z(10) ITA2007)

Disposals not at commercial rates

Disposals not made at commercial rates will be treated as a transaction made at market value. The amount to be taken offshore or invested will be the market value of the property immediately before the disposal takes place, less any agency fees deducted. (s809Z8(4) ITA2007)

Disposals made to another relevant person, or to a person connected with another relevant person, will always be treated as not made at commercial rates. (s809Z8(5) ITA2007)