The temporary repatriation facility

Until 5 April 2025, non-doms had the option of sheltering non-UK income and gains from UK tax by claiming the Remittance Basis. Ignoring TRF, income and gains that had been sheltered by the Remittance Basis (referred to in this article as pre-April 2025 FIG) were subject to UK tax if remitted to the UK at any point in the future and could be subject to income tax (at up to 48% in Scotland and 45% in the rest of the UK) or capital gains tax (at up to 24%) depending on what was remitted. This created an incentive for Remittance Basis Users to keep assets outside the UK if they could. If they did require the funds in the UK, complex and expensive analysis was often required to determine what had been remitted.

The TRF is designed to encourage Remittance Basis Users to bring their pre-April 2025 FIG to the UK by offering a significantly reduced tax rate during the tax years ending 5 April 2026, 2027 and 2028 (the TRF Period).

The TRF rules introduce a number of new concepts: the TRF allows taxpayers to designate Qualifying Overseas Capital (QOC) during the TRF Period by paying the TRF Charge. The QOC that has been designated is then referred to as TRF Capital.

Qualifying overseas capital

The most common type of QOC will be the individual’s pre-April 2025 FIG. However, non-UK income and gains arising in offshore trusts, companies and other structures which are attributed to the individual by anti-avoidance rules can also qualify for TRF. TRF can also apply where the tax status of non-UK assets is unclear. This may be useful in situations where the taxpayer has not kept detailed records of their non-UK income or gains or where the UK tax treatment is uncertain.

The definition of QOC is not limited to funds held in bank accounts. It extends to any asset acquired with pre-April 2025 FIG. So, for example, a pre-April 2025 FIG that has been used to acquire a non-UK holiday home could be designated under the TRF.

The TRF Charge

The individual is liable to a flat rate tax charge (the TRF Charge) on the amount of any QOC they designate during the TRF period. The TRF Charge is 12% if the designation is made for 2025/26 or 2026/27 and 15% for 2027/28, which represents a significant saving compared to the tax rates payable on a normal remittance which would apply to any FIG which is not designated under TRF and remitted in the future.

A few points to note about the TRF Charge:

• It is collected via self-assessment, so it is due by 31 January following the end of the tax year of designation.
• It is separate from the normal tax calculation, so it will not affect the rate of tax paid on other types of income or gains and will not affect the level of personal allowance available.
• Unlike the Remittance Basis Charge, there is nothing to stop the payment of the TRF Charge itself from constituting a taxable remittance, so this may need to be considered when deciding how much FIG to designate.
• No relief is available for any non-UK tax paid on the FIG. The TRF Charge is based on the amount of the FIG net of non-UK tax. This means there may be situations where TRF results in a higher effective tax rate than the normal remittance rules, which tax the remittance at higher rates but potentially allow a credit for any non-UK tax paid.
• The designation is deemed to occur at the start of the tax year. This means the individual can review remittances made during the year to determine whether a TRF claim is beneficial.

Other impacts of a TRF designation- mixed funds

In addition to the TRF Charge, there are a number of other effects of a TRF designation:

• The complex rules around mixed funds are modified to make it easier to access ‘clean’ or TRF capital. Currently, strict ordering rules apply to remittances from mixed funds, which are generally in HMRC’s favour rather than the taxpayer’s. In contrast, where a remittance is made from a mixed fund containing TRF Capital, the TRF Capital is deemed to be remitted before other types of income, gains or capital in the account, regardless of which tax year it relates to.
• Transactions in mixed funds containing TRF Capital can be considered on an annual basis to make it easier to ring-fence TRF Capital and prevent it from being accidentally mixed with other FIG and to reduce complexity.
• If the individual does not want to bring the funds to the UK immediately (e.g. to limit their UK assets for IHT reasons), they can create a dedicated TRF Capital Account and transfer TRF Capital without engaging the usual offshore transfer rules which would typically result in a proportion of all the contents of the account being transferred, not just the TRF.

How to get the most from TRF

The TRF rules present a significant opportunity for non-doms, but careful consideration is needed to achieve the best outcome and to ensure any decisions taken align with the individual’s overall financial planning, wealth management and estate planning strategy. Relevant considerations include:

1. The TRF is only beneficial if the pre-April 25 FIG are needed in the UK (otherwise, it can be kept outside the UK and so never be liable to UK tax). Taxpayers have to make decisions in the next three tax years about the level of funds they are likely to require for the rest of their lives (or at least until they leave the UK). This will naturally feed into wider financial and estate planning considerations. Many individuals find that a cashflow modelling exercise is a powerful tool to help them understand how their assets and funding requirements are likely to evolve over time. This can help inform decisions about how much they need for UK spending (so can benefit from TRF), for non-UK spending (so can be kept offshore) or not needed at all (so might be suitable for giving away during their lifetime).
2. For many non-doms, the end of the Remittance Basis may be the first time they have had to consider the UK tax treatment of some of their non-UK assets and structures. A detailed review of worldwide assets will help them to prepare for reporting of worldwide income and gains from 6 April 2025, as well as ensuring that the opportunity to use the TRF to deal with uncertain income and gains is not missed. Given HMRC’s continued focus on tackling offshore non-compliance, if any historic issues are identified, this will give the taxpayer the opportunity to resolve them with HMRC unprompted, allowing them to achieve the most favourable terms.
3. The TRF can be claimed on any non-UK funds or assets, even where it is unclear whether they are actually FIG. In some cases, it may be preferable to pay the TRF Charge on the whole amount rather than undertake a long (and potentially expensive) analysis exercise.
4. There will be cases where the TRF is not the best option for pre-April 25 FIG. An important example is likely to be where the FIG has been subject to non-UK tax. The TRF charge is payable on the net amount after foreign tax so a standard remittance with a credit for the non-UK tax may be more efficient.
5. If non-liquid assets are designated for FIG, the TRF Charge will need to be paid from other funds. Forward planning may be required to allow the payment to be made on time.

How Forvis Mazars can help

Worldwide asset review to identify FIG that is eligible for TRF and form the basis of advice on how to maximise the benefit of the TRF.

Cashflow modelling to help inform decisions about how much FIG to designate and to feed into wider estate planning.

Tax health check - review historic tax treatment and filing positions, including any potential UK tax risks associated with non-UK structures (e.g. trusts, companies, foundations, etc.). If any issues are found, our Tax dispute resolution team are experts in securing the best terms with HMRC.

Tax reporting - dealing with annual UK tax returns to ensure the TRF claim is made properly, and that worldwide income and gains are reported correctly.