The Basics
The Government will abolish the remittance basis from 6 April 2025 (read our article here). However, previous remittance users will still be subject to tax if they remit historic untaxed funds to the UK. The Temporary Remittance Facility (TRF) is an attempt to encourage taxpayers to remit funds to the UK.
The TRF will allow former remittance basis payers to remit funds to the UK at a favourable rate of tax. During the 2025 / 2026 and 2026 / 2027 tax years, the rate of tax will be 12%. This will increase to 15% for the 2027 / 2028 tax year. The key elements of the TRF are:
- You must be UK resident in the year you make the claim
- Specific funds must be designated
- You will pay tax at the time of the designation, but do not need to be remit the funds immediately (or at all)
- Once you have designated funds, they can be remitted without further UK tax being due
- If you do not pay the TRF charge from designated funds, this could itself be a chargeable remittance
Designations
One difficulty with the remittance basis has always been tracing offshore income and gains. Taxpayers often cannot determine whether their overseas assets represent capital, income, gains or a mixture of all three Under the TRF, it will be possible to designate funds even if it isn’t possible to identify what they represent. Helpfully, the TRF will also be available in relation to non-liquid assets. This will allow a taxpayer to designate almost anything that represents untaxed offshore income or gains.
If you make a partial designation (for example, only part of a bank account), those funds will be treated as being remitted in priority to other funds. The designation must be made in a self-assessment tax return for the relevant tax year.
Application to offshore trusts
In addition to personal assets, the TRF can be used to designate distributions from offshore trusts. When a UK resident beneficiary receives a trust distribution, historic trust income and gains may be matched to that distribution. However, if the beneficiary was previously a remittance basis user, they will be able to designate the distribution under the TRF.
If you are the beneficiary of an offshore trust, the TRF could allow you to extract funds from offshore trusts in a tax efficient manner. You will need to carefully plan any distributions to ensure that a TRF claim is appropriate. If you would like help with this, contact me using the link below.
