In a significant decision for non-domiciled individuals claiming Business Investment Relief (BIR), the Upper Tribunal has confirmed that any extraction of value from a company in which a qualifying investment has been made may trigger a clawback of relief, even if there is no net benefit to the investor.
In D’Angelin v Revenue and Customs Commissioners [2025] UKUT 212 (TCC), the appellant had invested £1.5 million of foreign income in a UK company in 2016, successfully claiming BIR under ITA 2007, s.809VA. However, between 2017 and 2018, he received payments from the company via a director’s loan account (DLA), which were used for personal expenses. HMRC issued a closure notice disapplying the relief and subjecting the £1.5 million to UK income tax.
The appeal was dismissed. The Tribunal held that the provision of the DLA breached the “extraction of value” rule in s.809VH(2). Crucially, the judges rejected the argument that “value” should be interpreted as “net value.” On a plain reading of the legislation, any receipt of value, regardless of whether it leaves the investor better off overall, may be sufficient to invalidate BIR.
The Tribunal emphasised that reading “net” into the legislation would be a significant departure from the statutory wording, one that Parliament could have made explicit but did not. Moreover, interpreting “value” narrowly would risk undermining the rule's purpose: to prevent investors from receiving benefit from their qualifying investments in a tax-free manner.
Importantly, the Tribunal noted that this interpretation limits the usability of BIR where the investee company is a close company, particularly if it acts as part of a group or holding structure. Nonetheless, this outcome was not deemed absurd, and the policy intention, to prevent disguised repatriation of foreign income, was upheld.
The Tribunal also found that the statutory saving provisions in s.809VH(3) did not apply. The DLA advances were not taxed as income (only the deemed interest was), and the terms of the loan were not considered arm’s length.
This decision reinforces the strict approach HMRC and the courts are likely to take when applying BIR rules. Investors and advisers must exercise caution when there is any prospect of receiving value, however indirect, from the investee company.