Finance Act 2025

Business investment relief U.K.

19 (1) ITA 2007 is amended as follows.

(2) In section 809VC (qualifying investments) in subsection (4), after “if” insert “—

(a) the investment is made before 6 April 2028,

(b) none of the money or other property used to make the investment is TRF capital, and

(c)”.

(3) In section 809VG (income or gains treated as remitted following certain events)—

(a) after subsection (6) insert—

“(6A) Where—

(a) the income or gains mentioned in subsection (1)(a) include amounts designated as TRF capital (in a tax year after the tax year in which the investment is made), and

(b) the portion of the investment affected is less than the whole of the investment,

so much of the affected income or gains as does not exceed the amounts designated is to be treated as being comprised of the TRF capital.

(6B) Where section 809VO (investments made from mixed funds) applies, subsection (8) of that section applies for the purposes of determining the composition of the amount of the affected income or gains that is not treated as being comprised of TRF capital (referred to as the “relevant affected income and gains” in that subsection) as a result of—

(a) subsection (6A) of this section not applying, or

(b) that subsection only applying to a part of the affected income or gains.”,

(b) in subsection (7)—

(i) for “Sections” substitute “Section”, and

(ii) for “and 809VO (investments made from mixed funds) make” substitute “makes”, and

(c) in subsection (9), after paragraph (a) insert—

“(aa) any part contained in amounts already treated as remitted under section 809VIA(4) following an earlier event,”.

(4) In section 809VN (order of disposals etc)—

(a) in subsection (2)(b), for the words from “order” to the end substitute “following order.”, and

(b) after subsection (2) insert—

“(2A) The order is—

(a) so much of the qualifying investments as were made using money or other property that is designated as TRF capital (in a tax year after the tax year in which the investment is made) to the extent those qualifying investments were made using that money or other property, and then

(b) in relation to whatever remains, the order in which the qualifying investments were made (that is to say, on a first in, first out basis).”, and

(c) in subsection (4), for paragraph (b) substitute—

“(b) assume that a disposal of all or part of that deemed single holding is—

(i) a disposal of so much of the deemed single holding as is from any qualifying investments that were made using money or other property that is designated as TRF capital (in a tax year after the tax year in which the investment is made) to the extent those qualifying investments were made using that money or other property, and

(ii) if any of the deemed single holding remains after the disposal referred to in sub-paragraph (i), a disposal of a holding from qualifying investments until the holdings from all the qualifying investments have been disposed of.”

(5) In section 809VO (investments made from mixed funds)—

(a) for subsection (4) substitute—

“(4) The “fixed proportion” is, unless subsection (4B) applies, the proportion of that kind of income or capital contained in the invested property by virtue of subsection (2).

(4A) Subsection (4B) applies, instead of subsection (3), for determining the composition of the holding in connection with the application of subsections (7) and (8) where the holding contains TRF capital (as a result of the designation of income or capital in the holding as TRF capital in the tax year after the tax year in which the relevant event occurred).

(4B) Where this subsection applies, take the following steps to determine the composition of the holding in connection with the application of those subsections—

• Step 1

  Determine the amounts of each kind of income and capital that the holding was treated as containing by virtue of subsection (3).

• Step 2

  Reduce the amount of each kind of income and capital by the amount (if any) of that income or capital as is TRF capital.

(4C) Where subsection (4B) applies, the “fixed proportion” is the proportion of that kind of income or capital treated as contained in the invested property by virtue of that subsection (instead of subsection (2)).”

(b) in subsection (7), after “proportion” insert “(determined under subsection (4) or (4C) as the case may be)”,

(c) in subsection (8)(a)—

(i) before “affected” insert “relevant”, and

(ii) before “portion” insert “relevant proportion of the”,

(d) in subsection (8)(b), after “(3)” insert “or (4B) (as the case may be)”, and

(e) after subsection (8) insert—

“(8A) For the purposes of subsection (8)(a)—

(a) the “relevant affected income or gains” means—

(i) in a case where section 809VG(6A) applies to treat some of the affected income or gains as being comprised of TRF capital, so much of the affected income or gains as is not treated as being comprised of TRF capital, or

(ii) otherwise, all of the affected income or gains, and

(b) the “relevant proportion” of the portion of the investment means—

(i) in a case where section 809VG(6A) applies to treat some of the affected income or gains as being comprised of TRF capital, the proportion of the portion of the investment that is equal to the proportion of the affected income or gains as is not treated as being comprised of TRF capital, or

(ii) otherwise, the whole of the portion of the investment.”

(6) In section 809VI (the appropriate mitigation steps), in subsection (3), after “But” insert “—

(a) see also section 809VIA (which makes provision treating the disposal proceeds as reduced where TRF capital is involved), and

(b)”.

(7) After that section insert—

“809VIA Application of appropriate mitigation steps where TRF capital involved

(1) This section applies in relation to a potentially chargeable event where, if no appropriate mitigation steps were regarded as taken, an amount of TRF capital would (ignoring this section) be treated as remitted to the United Kingdom immediately after the end of the relevant grace period as a result of section 809VG(2).

(2) Where there has been a disposal of all or part of the holding (see section 809VI(1) or (2)(b)), so much of the proceeds of that disposal as are equal to that amount of TRF capital is to be regarded as comprising that TRF capital.

(3) Section 809VI has effect as if references in that section to the disposal proceeds did not include the TRF capital.

(4) Unless section 809VG(2) applies in relation to the potentially chargeable event, the TRF capital is to be treated as remitted to the United Kingdom at the time the potentially chargeable event occurred.”