Introduction Remittance for Investment Purposes
7.Part 2 of the Schedule introduces a new tax relief for foreign income and gains which are brought to the UK for the purposes of making a qualifying investment. In such cases, provided the relevant conditions are met, those foreign income and gains will not be taxed under the remittance basis.
8.Paragraph 6 of the Schedule replaces the heading which currently precedes section 809V with ‘Relief for money used to pay tax, etc’.
9.Paragraph 7 of the Schedule introduces new sections 809VA to 809VO of ITA.
10.New section 809VA provides that certain income and gains brought to the UK for investment purposes are not treated as remitted to the UK.
11.Subsection (1) of section 809VA sets out the qualifying conditions for the business investment provisions. These are that a relevant event occurs which would otherwise be treated as a remittance of an individual’s income and gains and that the individual makes a claim for the relief under this section.
12.Subsection (2) of section 809VA provides that, where the conditions set out in subsection 809VA(1) are met, the income and gains of the individual are treated as not remitted to the UK and therefore not liable to tax in the UK.
13.Subsection (3) of section 809VA defines a ‘relevant event’ for the purposes of subsection 809VA(1) as an event in which money or other property is either used by relevant person to make a qualifying investment (as defined in section 809VC), or is brought to or received in the UK for the purpose of making such an investment.
14.Subsection (4) of section 809VA provides that the relief provided by this Part is also available in situations where a qualifying investment is made using the proceeds from the sale of property which has been purchased outside the UK using foreign income and gains.
15.Subsection (5) of section 809VA provides that, in order to qualify for the relief, a qualifying investment must be made within 45 days of the money or other property being brought to or received in the UK.
16.Subsection (6) of section 809VA provides that, where only part of the money or other property brought to the UK is used to make a qualifying investment within 45 days, the amount of income and gains which qualifies for the relief provided by new subsection 809VA(2) is to be determined on a just and reasonable basis.
17.Subsection (7) of section 809VA is an anti-avoidance provision which denies the relief provided in subsection 809VA(2) in circumstances where a relevant event occurs, or an investment is made, as part of or as a result of a scheme or arrangement whose main purpose, or one of whose main purposes, is tax avoidance.
18.Subsection (8) of section 809VA provides that an individual is required to make a claim for the relief no later than the first anniversary of 31 January of the tax year following the tax year in which the income and gains used to make a qualifying investment would otherwise be treated as a remittance of those income and gains.
19.New section 809VB deals with cases where money or other property is brought to the UK with the intention of making a qualifying investment but in the event some or all of that money or other property is not invested within 45 days of being brought to the UK.
20.Subsection (1) of section 809VB provides that this section applies to any amount of income and gains which does not qualify for the relief provided by subsection 809VA(2) because it was not used to make a qualifying investment within the 45-day period. It defines the ‘45-day period’ as the 45-day period beginning with the date on which the money or other property was brought to or received in the UK.
21.Subsection (2) of section 809VB provides that the amount referred to in subsection 809VB(1) is treated as not remitted to the UK to the extent that the remaining money or other property is taken offshore (as defined in section 809Z8) within the 45-day period.
22.Subsection (3) of section 809VB provides that, where only a part of the remaining money or other property is taken offshore within the 45-day period, the amount of income and gains which is treated as not remitted to the UK under subsection 809VA(2) is to be determined on a just and reasonable basis.
23.Subsection (4) of section 809VB provides that, notwithstanding subsection 809VA(2), the underlying income and gains in any remaining money or other property which is taken offshore within the 45-day period will be treated as being remitted to the UK if something is subsequently done with those income and gains which would itself count as a remittance.
24.Subsection (5) of section 809VB provides that references to the ‘remaining’ money or other property in this section are to the amount of the money or other property brought to or received in the UK which is not used to make a qualifying investment.
25.New section 809VC defines a qualifying investment for the purposes of section 809VA.
26.Subsection (1) of section 809VC provides that an investment is made for the purpose of section 809VA where a person either buys newly issued shares in a company or makes a loan to a company.
27.Subsection (2) of section 809VC provides that, for the purposes of this Part, the company in which an investment is made is referred to as ‘the target company’.
28.Subsection (3) of section 809VC provides that a person’s shares in or rights under a loan to a company, or a mixture of both, are referred to as ‘the holding’ for the purposes of this Part.
29.Subsection (4) of section 809VC provides that, where conditions A and B are met at the time the investment is made, that investment is counted as a qualifying investment.
30.Subsection (5) of section 809VC provides for the definition of conditions A and B in sections 809VD and 809VF respectively.
31.Subsection (6) of section 809VC provides that any reference to shares in this section includes securities.
32.Subsection (7) of section 809VC provides that, where a loan agreement authorises a company to draw down amounts of a loan over time, entry into that loan agreement is not treated as the making of a loan. Instead, a separate loan is treated as being made each time an amount is drawn down under that agreement.
33.Subsection (8) of section 809VC provides that, in cases referred to in subsection 809VC(7), each time an amount is drawn down under a loan agreement, a separate investment will be treated as having been made. It also provides that references in subsection 809VC(3) to a person’s rights under the loan applies to the extent that those rights which relate to the amount are actually drawn down.
34.Example: an individual enters into a loan agreement under which the target company is able to draw down £1 million in four equal amounts of £250,000 over a four-year period. If the £1 million is retained outside the UK before being drawn down, each drawdown will be treated as a separate qualifying investment and receive the relief afforded by subsection 809VA(2).
35.New section 809VD defines condition A for the purposes of subsection 809VC(4).
36.Subsection (1) of section 809VD provides that the investment must be in an eligible trading company, an eligible stakeholder company or an eligible holding company to be a qualifying investment.
37.Subsection (2) of section 809VD defines an eligible trading company as a private limited company (as defined in subsection 809VD(11)) which is carrying on at least one commercial trade (as defined in section 809VE), or is preparing to do so within the next two years, and where carrying on a commercial trade is all, or substantially all, it does or it is reasonably expected to do once it begins trading.
38.Subsection (3) of section 809VD defines an eligible stakeholder company as a private limited company which exists wholly, ignoring minor or incidental purposes, for the purpose of making investments in eligible trading companies (as defined in subsection 809VD(2)). An eligible stakeholder company must actually hold at least one investment in an eligible trading company or be preparing to do so within the next two years.
39.Subsection (4) of section 809VD explains that ‘making investments’ in subsection 809VD(3) takes the same meaning as in section 809VC.
40.Subsection (5) of section 809VD defines an eligible holding company as a member of an eligible trading group, or a member of a group which is expected to become an eligible trading group within the next two years, and which has a 51 per cent subsidiary which is an eligible trading company. Where the eligible holding company owns the share capital of the eligible trading company indirectly, each intermediary company must also be a member of the group.
41.Subsections (6) to (11) of section 809VD define certain terms used in section 809VD.
42.Subsection (6) of section 809VD defines ‘group’ as a parent company and its 51 per cent subsidiaries.
43.Subsection (7) of section 809VD defines ‘parent company’ as one which is not itself a 51 per cent subsidiary of any other company and which has at least one 51 per cent subsidiary.
44.Subsection (8) of section 809VD defines ‘eligible group’ as one in which the parent company and each of its 51 per cent subsidiaries are private limited companies.
45.Subsection (9) of section 809VD defines ‘eligible trading group’ as an eligible group in which all or substantially all of its activities, taking the members of the group as a whole, are carrying on a commercial trade.
46.Subsection (10) of section 809VD provides that section 1155 of the Corporation Tax Act 2010 applies to determine whether a company owns the share capital of a subsidiary indirectly.
47.Subsection (11) of section 809VD defines ‘private limited company’ as a body corporate with limited liability, none of whose shares are listed on a recognised stock exchange. It also excludes all limited liability partnerships.
48.New section 809VE defines a commercial trade for the purposes of section 809VD.
49.Subsection (2) of section 809VE provides that for the purposes of section 809VD ‘trade’ includes any activity that is treated as a trade for corporation tax purposes and a business of generating income from land. The meaning of ‘generating income from land’ is provided by section 207 of Corporation Tax Act 2009 and includes generating income from both residential and commercial property.
50.Subsection (3) of section 809VE provides that a commercial trade is one conducted on a commercial basis with a view to making profits.
51.Subsection (4) of section 809VE provides that carrying on research and development activities will be treated as carrying on a commercial trade for the purposes of section 809VD, provided it is intended that a commercial trade will be derived or will benefit from those research and development activities.
52.Subsection (5) of section 809VE provides that preparing to carry on research and development activities is not a commercial trade for the purposes of section 809VD.
53.New section 809VF sets out condition B for the purposes of determining whether an investment is a qualifying investment for subsection 809VC(4).
54.Subsection (1) of section 809VF provides that condition B is met where no relevant person has obtained, or becomes entitled to obtain, any related benefit or expects to obtain such a benefit, whether directly or indirectly. Whether a benefit is ‘related’ is determined by subsection 809VF(3) and a relevant person takes its meaning from section 809M.
55.Subsection (2) of section 809VF defines a benefit for the purposes of this section as including the provision of anything which would not be provided to the relevant person in the ordinary course of business, or would be provided but on less favourable terms. It also provides that a benefit does not include the provision of anything to the relevant person in the normal course of business and on arm’s length terms.
56.Subsection (3) of section 809VF sets out when benefit is ‘related’ for the purposes of subsection 809VF(1). This is widely defined and includes benefits which are directly or indirectly attributable to the making of the investment (whether the benefit arose before or after that investment was made), and benefits which, it is reasonable to assume, would not be available if the investment had not been made.
57.Subsection (4) of section 809VF provides that references to ‘the provision of anything’ in subsection 809VF(2) are to the provision of anything in money or money’s worth and includes anything which provides any enjoyment or benefit to a person, whether on a temporary or permanent basis.
58.New section 809VG sets out the circumstances in which income and gains which are brought to the UK to make a qualifying investment are treated as remitted to the UK. It also clarifies the relevant grace period which applies for these purposes, and splits combined investments into those that qualify for the relief and those that do not.
59.Subsection (1) of section 809VG provides that subsection (2) applies if foreign income and gains have been used to make a qualifying investment and so are treated as not remitted by section 809VA(2), a potentially chargeable event (as defined in section 809VH) has subsequently occurred and the appropriate mitigation steps (as defined in section 809VI) have not been taken within the relevant grace period (as defined in section 809VJ).
60.Subsection (2) of section 809VG provides that in the circumstances set out in subsection 809VG(1) the affected income and gains are to be treated as having been remitted immediately after the end of the relevant grace period.
61.Subsections (3) and (4) of section 809VG provide that the grace period allowed for appropriate mitigation steps is determined by the type of mitigation step which is required to be taken. Where the appropriate mitigation step is the disposal of the entire holding, the grace period is set out in subsection 809VJ(1). Where the mitigation step is the taking offshore or re-investment of disposal proceeds, the grace period is set out in subsection 809VJ(2).
62.Subsection (5) of section 809VG defines the affected income and gains as that portion of the income or gains which, in the absence of the relief provided in subsection 809VA(2), would have been treated as remitted to the UK, which reflects the portion of the investment affected by the potentially chargeable event.
63.Subsection (6) of section 809VG provides that, where the potentially chargeable event is a disposal of a part of the holding, the portion of the investment affected by that potentially chargeable event is equal to the portion that is disposed of. Where the potentially chargeable event is something other than a part disposal of the holding, the whole of the investment is affected.
64.Example: where the potentially chargeable event is that a company ceases to be an eligible trading company, the portion of the investment affected by that potentially chargeable event is the entire investment. If the appropriate mitigation step is not taken within the relevant grace period, all of the income and gains that were previously treated as not remitted because they were used to make a qualifying investment are treated as having been remitted at the end of that grace period.
65.Example: where an investor disposes of half of a shareholding, but fails to take the appropriate mitigation step within the relevant grace period, the portion of the investment affected by that potentially chargeable event is half.
66.Subsection (7) of section 809VG provides for sections 809VN and 809VO to apply alongside section 809VG.
67.Subsection (8) of section 809VG provides that, where an investment is made which consists partly of funds which qualify for relief under the business investment provisions and partly of other funds, the investment is treated as two separate investments. These combined investments are treated as split into investments which qualify for the relief and those which do not. It also provides that any references in the business investment provisions to ‘the investment’ and to ‘the holding’ only relate to qualifying investments.
68.Subsection (9) of section 809VG provides that, where there is a second or subsequent potentially chargeable event in relation to a single investment, the affected income or gains that are treated as remitted do not include any amounts treated as remitted, taken offshore or re-invested or used to make a tax deposit within section 809VK, as a result of a previous potentially chargeable event.
69.Example: an investor disposes of half of their qualifying investment and takes the appropriate mitigation steps in relation to that potentially chargeable event in year one.  In year two, they dispose of the remaining half of their investment, but fail to take the appropriate mitigation steps in respect of that disposal. As a result, only half of the investment, and therefore half of the income and gains which the original investment contained, is affected by the second part disposal and treated as remitted to the UK.
70.New section 809VH defines a potentially chargeable event. Where a potentially chargeable event occurs and the appropriate mitigation steps are not taken, income and gains will be treated as remitted in accordance with section 809VG.
71.Subsection (1) of section 809VH provides that a potentially chargeable event will occur where:
	the target company ceases for the first time to be any kind of eligible company;
	the relevant person who made the investment (‘P’) disposes of some or all of the qualifying investment;
	the extraction of value rule is breached; or
	the 2-year start-up rule is breached.
72.Subsection (2) of section 809VH sets out the circumstances in which the extraction of value rule is breached for the purposes of subsection 809VH(1). The rule is breached if the relevant person who made the investment or any other relevant person receives, or receives the benefit of, value in money or money’s worth from either an involved company or from anyone else in circumstances which are attributable to the investment or to any other investment made by a relevant person in an involved company. The extraction of value rule is not breached if the value is received as a result of a disposal of the holding because the disposal is itself a potentially chargeable event.
73.Subsection (3) of section 809VH provides that the extraction of value rule is not breached merely because a relevant person receives value which is treated as income for tax purposes (or would be if the relevant person were liable either to income or corporation tax), provided the value is paid or provided on arm’s length terms and in the ordinary course of business.
74.Example: where an individual makes a qualifying investment in a company of which they are a director, the receipt of director’s remuneration would not constitute an extraction of value, providing the remuneration is treated as a receipt for income tax purposes and paid on arm’s length terms in the ordinary course of business.
75.Subsection (4) of section 809VH defines an involved company for the purposes of subsection 809VH(2) as:
	the target company;
	any eligible trading company in which an eligible stakeholder company has invested or intends to invest;
	any eligible trading company which is a 51 per cent subsidiary of an eligible holding company; and
	any company connected with such a company.
76.Subsection (5) of section 809VH sets out when the 2-year start-up rule is breached. The rule will be breached if the target company is non-operational immediately after the end of the period of two years from the day on which the qualifying investment was made. The rule will also be breached if the target company becomes non-operational at any time after the end of this period. This ensures that, after the 2-year start-up period has ended, the target company must either be trading, hold shares in at least one 51 per cent subsidiary company which is trading or be a stakeholder in at least one eligible trading company which is trading. Where this is not the case, a potentially chargeable event will occur.
77.Subsection (6) of section 809VH explains that a target company will be non-operational for the purposes of the 2-year start-up rule in subsection 809VH(5) if it is an eligible trading, stakeholder or holding company but does not trade or, as a stakeholder company, does not hold shares in at least one eligible trading company that is trading, or as a holding company, has no 51per cent subsidiaries that trade. An eligible holding company will be non-operational if it is not a member of an eligible trading group.
78.Subsection (7) of section 809VH provides that references to ‘trading’ in subsection 809VH(6) mean carrying on one or more commercial trades, including research and development activities.
79.Subsection (8) of section 809VH provides that where the potentially chargeable event is a disposal of a qualifying investment and the consideration for the disposal is paid in instalments, then each instalment is treated as a separate disposal and a separate potentially chargeable event.
80.Subsection (9) of section 809VH provides that, where a potentially chargeable event occurs because of an insolvency step taken for genuine commercial reasons, it will not be treated as a potentially chargeable event. However, this does not prevent the receipt of value as a result of the insolvency step from being a potentially chargeable event.
81.Subsection (10) of section 809VH defines an insolvency step for the purposes of subsection 809VH(9). An insolvency step is taken if a company enters into administration or receivership, or is wound up or dissolved. An insolvency step is also taken if similar steps are taken in relation to a company under the law of a country or territory outside the UK. The company taking the insolvency step may be the target company or any eligible trading company that the target company has invested in as an eligible stakeholder or eligible holding company.
82.New Section 809VI sets out the ‘appropriate mitigation steps’ that must be taken, following a potentially chargeable event, in order to prevent the affected income and gains being treated as remitted to the UK under subsection 809VG(2). The appropriate mitigation steps must be taken within the relevant grace periods set out in section 809VJ. There are two types of appropriate mitigation steps depending on the type of potentially chargeable event.
83.Subsection (1) of section 809VI sets out the appropriate mitigation steps where the potentially chargeable event is a disposal of all or part of the holding. In this case the proceeds arising from the disposal must be taken offshore or re-invested.
84.Subsection (2) of section 809VI sets out the appropriate mitigation steps for any other potentially chargeable event. In this case the individual must dispose of the entire holding (or whatever part still belongs to the individual at the date of the potentially chargeable event) and either take the proceeds offshore, or re-invest them. For the purposes of the appropriate mitigation steps, the meaning of taking proceeds offshore is dealt with in section 809Z9 and the meaning of ‘ re-invested’ is provided in subsection 809VI(7).
85.Subsection (3) of section 809VI provides that, in cases where the disposal proceeds exceed amount X, it is only amount X that needs to be taken offshore or re-invested as the appropriate mitigation step.
86.Subsection (4) of section 809VI defines the amount ‘X’ for the purposes of subsection 809VI(3). Amount X is equal to the sum originally invested, less so much of that amount that has previously:
	been taken into account in determining the amount of income and gains treated as remitted after a potentially chargeable event;
	been taken offshore or re-invested as an appropriate mitigation step; or
	been used to make a tax deposit that reduces the amount that needs to be taken offshore or re-invested as an appropriate mitigation step.
87.Limiting the amount that has to be taken offshore or re-invested after a disposal in this way ensures that an individual will never be required to take offshore or re-invest more in total than the amount that was actually used to make the investment. If the whole of the holding is sold for more than the sum invested, so that there is a capital gain, then the individual is not required to take offshore or re-invest the amount of the capital gain. However, where there is a part disposal of the holding P is required to take offshore or re-invest the full amount of the proceeds up to the amount of the sum invested, even where the proceeds include an element of UK gain. The total amount that an individual is required to take offshore or re-invest can never exceed the total amount invested.
88.Example: an individual invests £3 million foreign income in an eligible trading company in year one. In year five, they dispose of half of the holding for £2 million. The disposal proceeds are £2 million and X (the sum originally invested) is £3 million. The investor must therefore take £2 million offshore or re-invest it to take the appropriate mitigation step.
89.In year seven, the investor sells the remainder of the holding for £3 million. The disposal proceeds are £3 million but, assuming that the appropriate mitigation step was taken after the first part disposal in year five, amount X is £3 million (the sum originally invested) less £2 million (the amount of the sum invested taken offshore or re-invested on a previous occasion). The investor must therefore take £1 million offshore or re-invest it. In summary, the individual has invested £3 million and has been required to take offshore or re-invest a total of £3 million as the appropriate mitigation steps following two potentially chargeable events.
90.Subsection (5) of section 809VI provides that, in determining amount ‘X’, the ‘amount originally invested’ is the amount of money used to make the original investment, or, if the investment was made using property other than money, the market value of that property.
91.Subsection (6) of section 809VI provides that, for the purposes of subsection 809VI(5), where market value needs to be applied because the original investment was made using property other than money, that property must be valued at the date of the relevant event. ‘Relevant event’ is defined in section 809VA as either the making of a qualifying investment or the bringing of money or other property to the UK for the purpose of making such an investment.
92.Subsection (7) of section 809VI provides that proceeds are re-invested, and the appropriate mitigation steps will be regarded as having been taken, where they are used to make another qualifying investment, whether in the same or a different company.
93.Example: where a share for share exchange has occurred whereby an individual disposes of shares in a qualifying company and simultaneously acquires new shares in the same or another qualifying company, the appropriate mitigation steps will be regarded as having been taken when the exchange takes place. In other words, the exchange will be treated as an immediate reinvestment in another qualifying company.
94.Subsection (8) of section 809VI provides that where a breach of the extraction of value rule takes place in connection with the winding up or dissolution of the target company there is no requirement to dispose of the holding and references to the disposal proceeds in this section and elsewhere in the business investment provisions are to be read as references to the value received.
95.New section 809VJ sets out the grace periods during which the appropriate mitigation steps must be taken.
96.Subsection (1) of section 809VJ provides a 90-day grace period for the step mentioned in subsection 809VI(2)(a) (disposal of the holding or the part of the holding still retained at the time of the potentially chargeable event). The 90 days starts from either of two points: where the potentially chargeable event is a breach of the extraction of value rule, it starts on the day the value is received. In all other cases it starts on the day on which a relevant person first became aware, or ought reasonably to have become aware, of the potentially chargeable event. ‘Relevant person’ is defined in the existing section 809M.
97.Subsection (2) of section 809VJ provides a 45-day grace period that operates in two circumstances: first, where the potentially chargeable event was itself a disposal, and second, where the potentially chargeable event was something other than a disposal and the individual has complied with the requirement in subsection 809VI(2)(a) to dispose of the holding (or whatever part of it remains in their possession). The individual has 45 days to take the proceeds offshore or re-invest them. The 45 days starts on the day that the proceeds first become available for use by P or by any other relevant person, or the proceeds first become available for use for the benefit of P or any other relevant person.
98.Subsection (3) of section 809VJ provides that an individual can ask an officer of HMRC to agree to extend a grace period in exceptional circumstances. HMRC will publish guidance on what is meant by exceptional circumstances.
99.Subsection (4) of section 809VJ allows an officer of HMRC to extend the grace period allowed for an appropriate mitigation step in circumstances specified in regulations made by the Commissioners.
100.The Government intends to introduce regulations under this power that will allow grace periods to be extended in the following circumstances:
	when an individual is prevented from disposing of shares due to a ‘lock-in’ agreement associated with a company becoming listed on a recognised stock exchange such that a holding of its shares would no longer be a qualifying investment; and
	when an individual is prevented from disposing of shares due to a statutory or regulatory barrier such as a ‘closed period’ following the company’s year end.
101.Subsection (5) of section 809VJ allows any regulations made by HMRC to take into account investments made before the regulations come into force.
102.Subsection (6) of section 809VJ provides that any regulations made under the power in subsection 809VJ(4) will not restrict the operation of HMRC’s power to extend a grace period in exceptional circumstances under subsection 809VJ(3).
103.Subsection (7) of section 809VJ provides that the powers conferred on an officer of HMRC to agree to extend a grace period for a length of time that is indefinite but which is capable of becoming definite by means identified in the agreement such as the satisfaction of conditions.
104.HMRC will issue guidance about the procedures that individuals will need to follow when making applications to extend grace periods and on the sorts of conditions that might be imposed.
105.New section 809VK provides the conditions under which part of the proceeds from a disposal of a qualifying investment can be retained in the UK to meet a capital gain tax (CGT) liability without being treated as remitted.
106.Subsection (1) of section 809VK sets out the conditions which have to be met before anything can be retained in the UK.  These are that:
	there has been a disposal of all or part of the holding;
	the disposal counts as a potentially chargeable event or is part of the appropriate mitigation steps taken in consequence of a potentially chargeable event;
	a chargeable gain accrues on the disposal to the individual who made the investment;
	that individual is chargeable to capital gains tax (but not corporation tax) in respect of that gain; and
	the actual disposal proceeds are less than an amount ‘Y’.
107.Subsection (2) of section 809VK defines ‘the shortfall’ for the purposes of this section as the difference between the actual disposal proceeds and amount ‘Y’ (as defined in subsection 809VK(4)).
108.Subsection (3) of section 809VK defines ‘the actual disposal proceeds’ as the disposal proceeds disregarding any effect of subsection 809Z8(4). That subsection provides that, where the disposal is not made by way of a bargain on arm’s length terms, the disposal is deemed to be made for a consideration equal to the market value of the holding immediately before the disposal. This means that the shortfall is calculated by reference to the proceeds which were actually received even where the disposal was not made on arm’s length terms.
109.Subsection (4) of section 809VK defines amount ‘Y’ as the sum of the amount that would otherwise be required to be taken offshore under subsection 809VI(1) or 809VI(2)(b), and the amount resulting when the highest potential CGT rate is applied to the chargeable gain resulting from the disposal.
110.Subsection (5) of section 809VK defines the highest potential CGT rate for the purposes of subsection 809VK(4) as that specified in section 4(3) of the Taxation of Chargeable Gains Act 1992 (TGCA) for trustees and personal representatives, and as specified in section 4(4) of that Act in all other cases.
111.Subsection (6) of section 809VK provides that, where an amount is retained in the UK under the provisions of section 809VK, the amount required to be taken offshore by subsection 809VI(1) or subsection 809VI(2)(b) is to be reduced by the amount which has been retained.
112.Subsection (7) of section 809VK defines ‘the permitted amount’ as the amount of the shortfall used to purchase a certificate of tax deposit within the 45-day grace period allowed for taking the proceeds offshore or re-investing them.
113.Subsection (8) of section 809VK provides that the reduction provided for in subsection 809VK(6) may not be made unless there is written confirmation to HMRC that the certificate of tax deposit purchased is intended to relate to section 809VK and does not exceed the shortfall calculated under subsection 809VK(2).
114.Example: an individual makes a qualifying investment using £10 million of their foreign income. They subsequently dispose of part of the investment and receive disposal proceeds of £1 million, of which £500,000 are a chargeable gain. This is the first disposal of any part of this qualifying investment and no funds have previously been taken offshore or re-invested as part of a mitigation step required by subsection 809VI(1) and subsection 809VI (2)(b).
115.The actual disposal proceeds are £1 million. The whole of the disposal proceeds would, but for this section, be required to be taken offshore by subsection 809VI(1). The highest potential CGT rate, as provided for an individual under section 4(4) TCGA, is 28 per cent. Therefore amount Y is the sum of £1 million and 28 per cent of £500,000, or £1.14 million. The actual disposal proceeds are less than Y, and the difference between them is £140,000, which is the shortfall.
116.The individual is therefore allowed to use any amount of the disposal proceeds up to £140,000 to purchase a certificate of tax deposit, provided this is done within the 45-day grace period from the date those proceeds first become available for the individual P to use, as provided by subsection 809VJ(2), and that it is confirmed in writing to HMRC that this deposit relates to this section.
117.The individual places the permitted amount of £140,000 in a certificate of tax deposit within the 45-day grace period. The amount that must be taken offshore under subsection 809VI(1) is reduced by £140,000, so £860,000 of the disposal proceeds must now be taken offshore or re-invested within the same grace period.
118.New Section 809VL describes the effect of taking the appropriate mitigation steps within the relevant grace period.
119.Subsection (1) of section 809VL explains that this section applies if appropriate mitigation steps are taken within the relevant grace period.
120.Subsection (2) of section 809VL provides that where an individual disposes of a qualifying investment and takes the proceeds offshore, subsection 809VA(2) will not prevent those proceeds, or anything deriving from them, from being treated as a taxable remittance in the usual way if they are brought to the UK on any subsequent occasion.
121.Subsection (3) of section 809VL deals with cases where an individual uses the proceeds from a disposal of a qualifying investment to re-invest in another qualifying investment. In such situations, the underlying income and gains (defined in subsection (6)), continue to be treated as not remitted to the UK. It also provides that part 2 of the Schedule will apply to that re-investment in the same way as it applied to the original investment.
122.Subsection (4) of section 809VL sets out rules which apply the business investment provisions in cases where the proceeds from the disposal of a qualifying investment are re-invested in another qualifying investment. These are that:
	the potentially chargeable event giving rise to disposal proceeds will be regarded as the relevant event for the purposes of subsection 809VA(3);
	the underlying income and gains from the disposal are to be treated as the income and gains treated as not remitted to the UK for the purposes of subsection 809VA(2); and
	the amount used to make the re-investment is to be treated as the sum originally invested.
123.Example: an individual disposes of a qualifying investment on 18 March 2015 and re-invests the entire proceeds in another qualifying investment on 31 March 2015. The disposal on 18 March was a potentially chargeable event, and this is counted as the relevant event for the purposes of subsection 809VA(3). The original investment was made with £1 million foreign income which continues to be treated as not remitted to the UK and to retain its original character in the new qualifying investment.
124.Subsection (5) of section 809VL provides further rules which apply where there is a re-investment which uses more than the disposal proceeds from the original investment. In such cases, the investment is to be treated as two separate investments, one of an amount equal to the disposal proceeds from the original investment, and one an amount equal to the balance.  Only the former amount is to be regarded as ‘the investment’ or ‘the holding’ for the purposes of the business investment provisions.
125.Subsection (6) of section 809VL defines ‘the underlying income or gains’ as the affected income or gains, or, in cases where the disposal proceeds are partly taken offshore and partly re-invested, a corresponding proportion of the affected income or gains as determined under section 809VG.
126.Subsection (7) of section 809VL requires the individual to make a further claim to business investment relief in respect of any amount re-invested. The deadline for making such a claim is the first anniversary of 31 January following the tax year in which the re-investment is made. It also provides that failure to make such a claim will mean that the appropriate mitigation steps will not be regarded as having been taken and subsection 809VG(2) will apply to treat the original investment as remitted to the UK.
127.Subsection (8) of section 809VL provides that section 809VM makes further provision in relation to cases involving a tax deposit.
128.New section 809VM deals with cases where there has been a disposal of a qualifying investment and part of the disposal proceeds have been put into a certificate of tax deposit to pay the CGT liability arising on the UK gain on that disposal, as provided by section 809VK.
129.Subsection (1) of section 809VM provides the conditions that need to be satisfied for this section to apply. These conditions are that:
	the appropriate mitigation steps were taken within the relevant grace period and so subsection 809VG(2) did not apply;
	the amount required to be taken offshore or re-invested by subsection 809VI(1) or subsection 809VI(2)(b) had been reduced by an amount allowed by section 809VK; and
	without that reduction, the amount that was actually taken offshore or re-invested would not have been enough to satisfy subsection 809VI(1) or subsection 809VI(2)(b).
130.Subsection (2) of section 809VM provides that references to ‘the tax deposit’ in this section are to the deposit which gave rise to the reduction.
131.Subsection (3) of section 809VM provides that if funds in a certificate of tax deposit by virtue of the provisions in section 809VK are used to meet the relevant tax liability, then the underlying foreign income and gains in those funds shall not be treated as having been remitted to the UK. In particular, the relief afforded by subsection 809VA(2) shall continue to apply to those income and gains.
132.Subsection (4) of section 809VM provides that if any of the certificate tax deposit (CTD) conditions are breached then the underlying income and gains are to be treated as having been remitted to the UK.
133.Subsection (5) of section 809VM defines ‘the underlying income and gains’. Where the underlying income and gains relate to funds in a certificate of tax deposit being used to meet the relevant tax liability (as in subsection (3)), then they are to be treated as the portion of the affected income and gains that the payment represents. Where there has been a breach of the CTD conditions, the underlying income and gains are the portion of the affected income and gains affected by the breach.
134.Affected income and gains are defined generally in subsection 809VG(5) and specifically for mixed funds in subsection 809VO(8).
135.Subsection (6) of section 809VM provides for the CTD conditions.  These are that:
	the tax deposit must be used to pay the relevant tax liability;
	any funds withdrawn from the tax deposit which are not used to pay the relevant tax liability must be taken offshore or re-invested within 45 days of the day on which the withdrawal is made; and
	any funds not withdrawn or used to pay the relevant tax liability by the due date must be withdrawn and taken offshore or re-invested within 45 days of the due date, defined in subsection 809VM(8)(b) as the date on which the relevant tax liability is required to be paid.
136.Subsection (7) of section 809VM provides that, where funds in a certificate of tax deposit are taken offshore or re-invested within the 45-day period allowed by subsection (6) in line with the CTD conditions, those funds are treated, for the purposes of section 809VL, as if they were disposal proceeds which had been taken offshore or re-invested.
137.Subsection (8) of section 809VM provides definitions of the following terms used in this section:
	‘the relevant liability’;
	‘the due date’; and
	‘re-invested’.
It also provides that references to a withdrawal in this section include any repayment.
138.New section 809VN provides rules which determine the order in which disposals are treated as being made where there are multiple acquisitions and disposals in the same target company or group and where both qualifying and non-qualifying investments have been made.
139.Subsection (1) of section 809VN sets out when the first in, first out rule provided by subsection 809VN(2) is to apply. This is where an individual has made different qualifying investments in either the same target company or the same eligible trading group or in both an eligible trading company and its eligible stakeholder company.
140.The terms ‘target company’, ‘eligible trading group’, ‘eligible trading company’ and ‘eligible stakeholder company’ are defined in section 809VD.
141.Subsection (2) of section 809VN provides that, where income and gains are treated as remitted to the UK under section 809VG, all the investments and holdings are treated as a single investment and a single holding. Any disposal of all or part of that investment or holding is then treated as a disposal of the single investment but with the effect of disposals in the order in which the individual qualifying investments were made, starting with the qualifying investment which was made first.
142.Subsection (3) of section 809VN provides that subsection 809VN(4) applies where foreign income and gains are treated as not remitted to the UK as a result of one or more qualifying investments, and where a relevant person holds one or more other investments in the same eligible trading company, eligible trading group or a related eligible company in a situation where that other investment is not a qualifying investment.
143.Subsection (4) of section 809VN provides that, where income and gains are treated as remitted to the UK under section 809VG, all the investments and holdings are treated as a single investment and a single holding. Any disposal of all or part of that investment or holding is then treated as a disposal of a holding of all qualifying investments before a disposal of any of the non-qualifying investments.
144.Subsection (5) of section 809VN defines a ‘related eligible company’ for the purposes of subsection 809VN(3). In the case of an eligible trading company, a related eligible company is an eligible stakeholder company which holds investments in that trading company. In the case of an eligible stakeholder company, a related eligible company is an eligible trading company in which that company holds investments.
145.Subsection (6) of section 809VN provides that subsection 809VN(2) and subsection 809VN(4) apply both where the investments are held by the same relevant person and where they are held by different relevant persons.
146.New section 809VO deals with qualifying investments which are made from a mixed fund. A mixed fund is defined in section 809Q(6) as an overseas fund of money or other property which contains or consists of more than one type of income or gains, or income or gains from more than one tax year. Where an amount is remitted from a mixed fund, there are special ordering rules which determine how the remitted amount is taxed.
147.Subsection (1) of section 809VO provides for this section to apply where a qualifying investment is made from a mixed fund as defined in section 809Q.
148.Subsection (2) of section 809VO provides that the relevant event is treated as an offshore transfer for the purposes of section 809R(4). A ‘relevant event’ is defined in subsection 809VA(3) as using income and gains to make a qualifying investment or bringing income and gains to the UK for the purpose of making such an investment.
149.Broadly, the effect of treating a relevant event as an offshore transfer is that the amount brought to the UK is treated as containing the same proportions of income, gains and capital as there was in the mixed fund immediately before the transfer took place.
150.Subsection (3) of section 809VO provides that the holding also is to be treated as containing a proportion of each kind of income and capital as there was in the invested property, but equal to the fixed proportion.
151.Subsection (4) of section 809VO defines ‘the fixed proportion’ for the purposes of subsection 809VO(3) as the proportion of income or capital contained in the invested property (as defined in subsection 809VO(5)) which is determined by the application of the offshore transfer rules.
152.Subsection (5) of section 809VO defines ‘the invested property’ as the money or other property which was used to make the qualifying investment.
153.Subsection (6) of section 809VO provides that subsection 809VO(7) applies where the money or other property is treated as not remitted to the UK because an amount is taken offshore, re-invested or used to make a tax deposit.
154.Subsection (7) of section 809VO provides that the amount referred to in subsection 809VO(6) as being taken offshore, re-invested or used to make a tax deposit is treated as containing the fixed proportion of each kind of income and capital as was contained in the holding.
155.Subsection (8) of section 809VO provides that the amount of the different kinds of income and gains in the holding (determined by applying the fixed proportion rule) is ‘the fixed amount’. Where income and gains are treated as remitted to the UK because the appropriate mitigation steps were not taken within the grace period, the amount treated as remitted (the affected income and gains) are so much of the fixed amount of each kind of income and gain as was contained in the amount invested which reflects the portion of the investment affected by the potentially chargeable event. In other words, the mixed fund rules do not apply to determine the amounts remitted.
156.Subsection (9) of section 809VO applies sections 809R(2), 809R(3) and 809S to section 809VO.
157.Paragraph 8 of the Schedule inserts the heading ‘Relief for certain UK services’ after the sections inserted by paragraph 7 of the Schedule.
158.Paragraph 9 of the Schedule inserts the heading ‘Exempt property relief’ immediately before section 809X.
159.Paragraph 10 of the Schedule amends section 809Y ITA by inserting new subsections (6) to (10). These deal with cases where property which has ceased to be exempt property is subsequently used to make a qualifying investment. Section 809Y(1) provides that property which ceases to be exempt property is to be treated as remitted at the time it ceases to be exempt property.
160.New subsection (6) of section 809Y prevents exempt property from being treated as remitted to the UK under subsection 809Y(1) if it is used to make a qualifying investment, provided that investment is made within 45 days of it ceasing to be exempt property. This rule also applies to anything into which that property is converted. This treatment is only allowed if the remittance basis user (as defined in section 809Z10) makes a claim for this relief on or before the anniversary of 31 January following the end of the tax year in which the property ceased to be exempt property.
161.New subsection (7) of section 809Y provides that references in subsection 809Y(6)(a) to anything into which exempt property is converted are, in cases where the property is sold, to the proceeds of that sale or, where the property is converted into money in some other way, the money into which it is converted. This is also the case when the conversion takes place after the property ceases to be exempt property.
162.New subsection (8) of section 809Y provides rules which apply where subsection 809Y(1) does not apply by virtue of subsection 809Y(6).
163.Subsection (8)(a) of section 809Y provides that the property, or anything into which that property is converted, is treated as containing or deriving from an amount of each of the categories of income and gains set out in the mixed fund rules in subsection 809Q(4)(a) to (h) as is equal to the fixed amount. These amounts do not include any capital contained in the property or from which the property has been derived.
164.Subsection (8)(b) of section 809Y provides that the foreign income and gains which are treated under section 809X as not remitted to the UK will continue to be treated as not remitted, even though the property has ceased to be exempt property
165.Subsection (8)(c) of section 809Y provides that the business investment provisions apply to the foreign income and gains in the same way as they apply to foreign income and gains which are treated as not remitted to the UK under subsection 809VA(2).
166.New subsection (9) of section 809Y defines ‘the fixed amount’ for the purposes of subsection 809Y(8)(a) as the amount of that category of foreign income and gain which was contained in the property when it was brought to or received in the UK.
167.New subsection (10) of section 809Y provides that, where a qualifying investment is made using exempt property (including anything into which that property is converted) together with money or other property, only that part of the investment made using the exempt property is the qualifying investment for the purposes of the business investment provisions.
168.Paragraph 11 of the Schedule removes the definition of a relevant person in subsection 809Z(2)(a).
169.Paragraph 12 of the Schedule amends section 809Z4 and provides that the time in which exempt property is invested in a qualifying investment under section 809VA is not a countable day for the purposes of the temporary importation rule. The temporary importation rule allows exempt property to be brought to the UK without triggering a remittance, provided the number of days it spends in the UK (‘countable days’) does not exceed 275 in total.
170.Paragraph 13of the Schedule substitutes the phrase ‘this Chapter’ for ‘sections 809L, 809N and 809O’ in section 809M.
171.Paragraph 14 of the Schedule removes subsection 809Z7(7).
172.Paragraph 15 of the Schedule introduces the heading ‘Meaning of ‘foreign income and gains’, etc.’ for section 809Z7.
173.Paragraph 16 of the Schedule inserts new interpretative provisions in new sections 809Z8 to 809Z10.
174.Subsection (1) of section 809Z8 provides that ‘the disposal proceeds’ means the consideration for the disposal less any agency fees which are deducted before the consideration is paid or otherwise made available to or for the benefit of the person making the disposal or any other relevant person.
175.Subsection (2) of section 809Z8 provides that subsections 809Z8(3) to 809Z8 (7) apply in determining the consideration for the disposal.
176.Subsection (3) of section 809Z8 provides that, where the consideration is provided in a form other than money, the amount of the consideration is the market value of what is provided at the time of the disposal.
177.Subsection (4) of section 809Z8 provides that, where the disposal is not made on arm’s length terms, the consideration is the market value of what is disposed of immediately before the disposal takes place.
178.Subsection (5) of section 809Z8 provides that any disposal made to another relevant person or to a person connected with a relevant person is not treated as being made on arm’s length terms and therefore that the consideration is the market value of what is disposed of immediately before the disposal takes place.
179.Subsection (6) of section 809Z8 defines ‘agency fees’ as any fees and other incidental costs of a disposal charged to the person making the disposal or any other relevant person by or through whom the disposal is effected. It also provides that ‘agency fees’ excludes any costs either charged by a relevant person or in any way applied for the benefit of a relevant person.
180.Subsection (7) of section 809Z8 provides that the exclusion of costs charged by a relevant person or in any way applied for the benefit of a relevant person from the definition of agency fees does not apply where the fees or costs relate to a service provided by the relevant person in connection with the disposal and do not exceed the amount which would be charged for that service if it were provided in the ordinary course of business on arm’s length terms.
181.New section 809Z9 provides further rules which apply when something is taken offshore or used to make a qualifying investment.
182.Subsection (1) of section 809Z9 provides that section 809Z9 applies to the various provisions in the chapter which require something, including disposal proceeds, to be taken offshore or to be used by a relevant person to make a qualifying investment.
183.Subsection (2) of section 809Z9 defines what is meant by ‘taken offshore’. A thing is taken offshore when it is taken out of the UK such that it ceases to be available to be used or enjoyed in the UK by or for the benefit of a relevant person, or ceases to be available to be used or enjoyed in any other way that would count as a remittance of income or gains to the UK.
184.Subsection (3) of section 809Z9 provides for situations in which money is required to be taken offshore or invested and is paid temporarily into a bank account. Under such circumstances, the money will be regarded as having been taken offshore or invested only where the money taken offshore or invested is taken from the same bank account.
185.Subsection (4) of section 809Z9 provides for circumstances in which something other than money is received as sales proceeds. In such cases, that thing will be regarded as having been taken offshore or invested if it is either taken offshore or invested, or if money or property of the equivalent value is taken offshore or invested.
186.Subsection (5) of section 809Z9 defines ‘the equivalent value’ for the purposes of subsection 809Z9(4) as the market value of the thing at the date of the sale or other disposal which triggered the requirement to send that thing offshore or invest it.
187.Subsection (6) of section 809Z9 provides for situations where consideration is deemed under subsection 809Z8(4) to be equal to the market value because the disposal was not made on arm’s length terms. In such cases, the requirement for proceeds to be taken offshore or invested may be satisfied by taking offshore or investing an amount equal to the deemed consideration less any agency fees deducted before the consideration is paid to or for the benefit of a relevant person.
188.Subsection (7) of section 809Z9 prevents an individual taking offshore or investing an asset of the equivalent value if the asset in question falls within one of three categories: it is exempt property under section 809X, or is consideration for the disposal of exempt property, or is consideration for the disposal of an investment qualifying for business investment relief.  In these three situations, the individual will already be required, under one of the provisions elsewhere in the chapter, to take offshore or re-invest the money or other property in order to take the appropriate mitigation steps.
189.Subsection (8) of section 809Z9 provides that, where an equivalent amount is taken offshore or invested, it is to be treated as deriving from the thing to which it is equivalent and as having the same proportions of kinds of income and capital as that thing.
190.Subsection (9) of section 809Z9 provides that, where there is provision that requires something to be taken offshore or invested, an individual may satisfy that provision by taking the whole thing offshore, investing the whole thing, or taking part offshore and investing the remaining part.
191.Subsection (10) of section 809Z9 provides that references to something being ‘invested’ in this section are to something being used by a relevant person to make a qualifying investment.
192.Subsection (11) of section 809Z9 provides special rules for cases covered by subsection 809VB(2) which requires money brought to the UK for the purposes of making a qualifying investment either to be used for that purpose within 45 days or else taken back offshore within the same period. In such cases, references in section 809Z9 to investing are to be disregarded, and if appropriate the date for valuing a property other than money is the date of the relevant event as defined in subsection 809VA(3).
193.New section 809Z10 provides definitions of the following terms used in the Chapter:
	‘the business investment provisions’ are sections 809VA to 809VO;
	‘the Commissioners’ are the Commissioners for HMRC;
	‘market value’ has the same meaning as in TGCA, and in particular sections 272 and 273;
	‘qualifying investment’ has the meaning given by section 809VC;
	‘relevant person’ has the meaning given by section 809M; and
	‘the remittance basis user’ is the individual whose foreign income and gains are potentially subject to the remittance basis.
194.Paragraph 17 of the Schedule provides that the amendments made by part 2 of the Schedule apply to any relevant event which takes place on or after 6 April 2012. A relevant event is defined in subsection 809VA(3) as an event in which a relevant person either makes a qualifying investment or brings or receives money or other property  to the UK for the purpose of making such an investment.