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Use of government scheme to encourage non-dom investment in UK businesses hits record high

Use of the government scheme encouraging investment in UK businesses by non-domiciled individuals has hit a record high, says Boodle Hatfield, the leading private wealth law firm.

Non-doms invested £979m in British businesses through the Business Investment Relief scheme last year*, a rise of 8% on the previous year and an almost fivefold increase on 2012/13, the year it was introduced (see graph below). The relief has now channelled almost £3.5 billion into UK businesses since it was introduced.

Boodle Hatfield explains that after a slow start, more non-doms are becoming aware of the potential to use Business Investment Relief to help UK businesses grow. 500 non-doms used the relief to invest last year, up from 200 in its first year.

Business Investment Relief allows non-doms to bring money into the UK tax-free, so long as it is used to purchase shares in or make a loan to a British business. Non-doms would otherwise have to pay tax rates of up to 45% on this money if they remit it to the UK.

Boodle Hatfield says that Business Investment Relief has become a vitally-important conduit for inward investment. Kyra Motley, Partner at Boodle Hatfield, says that recent changes to the relief are likely to make it even more popular among non-doms.

The changes made to Business Investment Relief last year mean that individuals can now invest in a business up to five years before it begins trading. The previous limit was two years. This has made it more attractive to invest in technology companies that are in the development stage, and may still be several years away from generating revenue.

Kyra Motley, Partner at Boodle Hatfield, comments: “Non-doms are now an increasingly important source of investment for growing British businesses, and Business Investment Relief has played a big role in that.”

“The almost £1bn that was invested through Business Investment Relief last year would probably never even have entered the UK without it.”

“The Government recently made some very positive changes to the relief, so there’s a good chance that investment by non-doms into growth businesses will soon pass the £1bn per year barrier.”

“Business Investment Relief is particularly popular among the younger, more entrepreneurial members of wealthy overseas families. They’re often much more keen to invest in fast-growing sectors like fintech than their parents’ generation might have been.”

Use of Business Investment Relief to invest in UK businesses nears £1bn per year barrier

 2016/17 tax year – most recent data available. Source: HMRC

* 2016/17 tax year – most recent data available. Source: HMRC

This article first appeared in Accountancy Daily on 16 January 2020 and eprivateclient on 14 January 2020. Find out more about our Private Wealth services.

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