Understanding the Temporary Repatriation Facility for individuals with overseas income and gains

The UK’s Autumn 2024 Budget introduced significant reforms affecting individuals with overseas income and gains, shifting from a domicile-based system to a residence-based taxation approach. A cornerstone of these reforms, effective from 6th April 2025, is the Temporary Repatriation Facility (TRF). Designed as a transitional measure, it is available for three years until 5th April 2028.

Here’s what you need to understand about the TRF, including how it might affect your situation and why guidance from Gravita can help ensure you remain compliant.

What is the Temporary Repatriation Facility (TRF)?

The TRF allows former non-domiciled remittance basis users a limited-time window to bring unremitted overseas income and gains into the UK without incurring the marginal UK tax charges that would usually apply to such remittances. It applies to pre-6th April 2025 foreign income and gains (FIGs), including those generated in structures such as offshore trusts, and offers a reduced tax rate of 12% on amounts designated under this facility during 2025-26 and 2026-27 tax years. The rate rises to 15% in the third and final year of the facility, 2027-28.

It’s important to note that these rates are fixed and only apply to amounts designated within the three-year window. After 5th April 2028, any foreign income or gains remitted to the UK will be subject to usual UK marginal tax rates.

Who qualifies for the TRF?

To benefit from the TRF, you must meet certain eligibility requirements. The key condition is that you must have previously been subject to the remittance basis for at least one tax year. The relief is therefore available to UK residents who were previously non-domiciled and have offshore income or gains that would otherwise have been taxed on the remittance basis.

Additionally, only income and gains arising before 6th April 2025 are within scope. This means individuals who become UK resident after this date, or those without historic remittance basis claims, are unlikely to qualify.

What types of income and gains are included?

The TRF applies broadly to foreign income and gains held offshore. This includes:

• Investment income held in overseas bank and other financial accounts
• Capital gains from the sale of offshore assets
• Foreign income and gains within offshore trust structures (if the individual is a beneficiary and the trust allows access to those funds)

There are exclusions to be aware of, and tracing rules may apply where income has been mixed or reinvested. For example, where funds have been transferred between accounts or merged with clean capital, specific rules determine how much qualifies for the 12% or 15% tax rate.

Your obligations under the TRF

This is not an automatic relief. Individuals will be able to make an election in which they can designate an amount which will then be taxed at the reduced TRF rates. A designation election must be made in an individual’s Self-Assessment tax return and must:

• Set out the total amount designated, and
• Identify which (if any) amounts designated have been remitted in the tax year to which the return relates

Why the TRF matters

The shift to a residence-based system marks a fundamental change in how the UK taxes globally mobile individuals. For those who previously relied on the remittance basis to shelter foreign income and gains from UK tax, the TRF provides a final opportunity to bring funds to the UK at a preferential rate before the new system takes full effect.

For some, this may represent a chance to restructure offshore wealth and reinvest in UK-based assets. For others, it may be a way to prepare for a longer-term move away from offshore structures.

In either case, acting within the TRF’s limited window is crucial.

How Gravita can support you

At Gravita, we understand the nuances of these significant legislative changes. Our dedicated tax team, led by Tax Partner, Dion Laycock, can provide tailored advice ensuring you meet all necessary compliance obligations efficiently.

We can assist with:

• Assessing your eligibility for the TRF
• Reviewing the source and history of offshore funds
• Structuring repatriation efficiently and in line with HMRC requirements
• Ensuring full compliance with reporting obligations
• Advising on broader tax planning ahead of the 2028 deadline

The TRF presents an important opportunity but one with stringent conditions attached. Ensure you approach it correctly. For personalised advice or to discuss your specific situation, contact Tax Partner Dion Laycock at Gravita today.