RDRM34480 - Remittance Basis: Exemptions: Business investment relief: Grace periods

When a potentially chargeable event [see RDRM34390] occurs, the investor has specific time limits in which to take appropriate mitigation steps [see RDRM34440]. These time limits are called grace periods. The table below sets out the grace periods that apply to different potentially chargeable events. (s809VJ ITA2007)

Potentially chargeable event	Grace period to dispose of the holding	Grace period for dealing with the proceeds
Disposal of all or part of the holding	Not applicable	45 days to take the disposal proceeds offshore or to reinvest them, beginning on the day on which the disposal proceeds become available to a relevant person. The disposal proceeds, up to amount ‘X’ (see RDRM34440), must be taken offshore or reinvested to successfully carry out the mitigation steps.
Extraction of value	90 days to dispose of the holding, beginning on the day on which value is received. See next column	45 days to take the disposal proceeds offshore or to reinvest them, beginning on the day on which the disposal proceeds become available to a relevant person. The disposal proceeds, up to amount ‘X’ (see RDRM34440), must be taken offshore or reinvested to successfully carry out the mitigation steps.
Ceasing to be an eligible company or breach of the 2-year rule	90 days to dispose of the holding, beginning on the day on which a relevant person becomes aware, or ought reasonably to have been aware, of the potentially chargeable event. See next column	45 days to take the disposal proceeds offshore or to reinvest them, beginning on the day on which the disposal proceeds become available to a relevant person. The disposal proceeds, up to amount ‘X’ (see RDRM34440), must be taken offshore or reinvested to successfully carry out the mitigation steps.
Breach of the 5-year start-up rule	2 years to dispose of the holding, beginning on the day on which a relevant person becomes aware, or ought reasonably to have been aware of the potentially chargeable event	-

Note: The breach of the 2-year start-up rule was amended in the 2017 Finance Bill changes. This has been increased to 5 years, but only for investments made on or after 6 April 2017. For investments made before this date a potentially chargeable event will occur if there is a breach of the 2-year start-up rule.

Start date for grace periods

Payment by instalments

If payments are received in instalments, each payment is considered to be a separate disposal and each will trigger the start of a grace period.

2 and 5-year rule/company ceases to be eligible

In the case of a breach of the 2 or 5 year start-up rule or where a target company ceases to be an eligible company, the grace period starts when the investor ‘becomes aware or ought reasonably to have been aware’ of the potentially chargeable event. Whether it is reasonable for an investor to be aware of a potentially chargeable event will be considered on the merits and specific facts in each case.

Extraction of value rule

Where the extraction of value rule is breached, the grace period commences on the day the value is received.