Temporary Repatriation Facility (TRF) 2025–2028: UK Non-Doms' Guide to Offshore Tax Relief

Explore HMRC's new Temporary Repatriation Facility for UK non-doms (2025–2028). Learn how to reduce offshore tax exposure with TRF designation rules and compliance strategies.

What Is the TRF and Why It Matters in 2025?

In a strategic move aimed at simplifying the UK’s complex tax regime for non-domiciled individuals, HMRC has introduced a Temporary Repatriation Facility (TRF). This limited-time window offers UK-resident Non-Doms the opportunity to bring overseas income and gains into the UK under a favorable tax arrangement. Available from 6 April 2025 to 5 April 2028, this three-year initiative offers substantial tax and compliance advantages—if approached correctly.

The TRF is designed to encourage the inflow of overseas capital into the UK by offering a concessional tax rate on designated funds (irrespective of funds actually being remitted to the UK). It was legislated under the Finance Act 2025, Schedule 2. For those who qualify, this represents a unique chance to streamline global finances, stay compliant, and reduce potential future tax exposure.

Who Qualifies for the TRF?

To be eligible for the TRF, an individual must be a UK tax resident and must have previously claimed the remittance basis of taxation for any tax year up to and including 2024/25 or are beneficiaries of trusts distributing pre-6 April 2025 income/gains during the TRF period.

Eligibility Criteria for Designation

Eligibility is not limited to income already brought to the UK—foreign income, capital gains, or assets from pre-6 April 2025 qualify, even if the exact classification isn’t clear.

Tax Rates and Key Features of TRF Participation

The TRF is available throughout three tax years and applies as follows:

• 12% tax rate for funds designated in 2025/26 and 2026/27
• 15% tax rate in 2027/28

For example, a £500,000 designation in 2025/26 would incur £60,000 in taxes significantly lower than standard rates, offering potentially massive savings.

Importantly, designated funds do not need to be immediately remitted. However, it is to be noted that tax is payable in the year of designation, even if funds remain offshore. Both cash and non-cash assets (like artworks or investments) can be designated under TRF.

What Counts as Qualifying Overseas Capital?

Qualifying capital includes unremitted overseas income and gains arising before 6 April 2025. This can include:

• Funds still held abroad
• Previously remitted funds in the TRF period
• Amounts from mixed sources, even if classification is uncertain

Partial designations are permitted. Foreign employment income earned pre-6 April 2025 but received during the TRF period (by 5 April 2028) can also be designated. Taxpayers are not obligated to declare all unremitted income or gains.

How to Designate Funds Under TRF’

Designating an amount as TRF Capital is a formal process, done through the self-assessment tax return. Once designated, the funds are treated as TRF Capital from the beginning of that tax year, even if the designation is made closer to the filing deadline.

Key points regarding TRF designations include:

ü  You can designate specific amounts or assets, offering flexibility without the need to commit to your entire offshore portfolio.

ü  Remittance is not required at the time of designation. You may choose to keep designated funds abroad, including in the form of non-cash assets such as investments or tangible property.

ü  Accurate documentation is crucial, especially for mixed accounts. You must be able to demonstrate the origin and classification of the designated funds.

ü  While not mandatory, creating a TRF Capital Account can help you separate designated assets from the rest. This reduces the risk of unintentional remittances or compliance issues.

Designations are effective only when properly reported. It’s highly recommended to consult a tax advisor before making them.

TRF Capital Account & Mixed Fund Management

For mixed funds—those combining income, gains, and capital—taxpayers must identify and document the nature of the designated amounts. Designations are treated as remitting the oldest unremitted income/gains first (FIFO basis). Creating a TRF Capital Account can help segregate designated from non-designated funds, but care must be taken; anti-avoidance rules apply, and any breach may trigger adverse tax outcomes. It is important to note that if designated funds are later mixed with non-TRF funds or remitted improperly, HMRC can impose penalties (up to 30% of tax due).

Step-by-Step: How to Participate in the TRF Scheme

Participation involves several steps:

1. Review offshore accounts and assets to determine eligible amounts.
2. Segregate and identify qualifying funds, especially if held in mixed accounts.
3. Designate these amounts in your Self-assessment tax return. For 2025/26, this can be done up until 31 January 2027.
4. Retain documentation and, if helpful, set up a TRF capital account.

No pre-notification to HMRC is required, but accurate reporting is essential.

Advantages of the Temporary Repatriation Facility

There are clear financial and administrative advantages:

ü  Lower tax burden: 12–15% tax rates compare favorably to standard income (up to 45%) and capital gains tax rates (up to 24%)

ü  Flexibility: Funds don’t have to be remitted immediately

ü  Control: You can choose which assets to designate

ü  Clean-up opportunity: Bring clarity to long-standing offshore holdings

Action Plan for Non-Doms

To make the most of the TRF, consider this structured approach:

1. Identify and evaluate offshore income, gains, and assets from before 6 April 2025.
2. Segregate and classify funds, especially if held in mixed accounts.
3. Designate chosen amounts as TRF capital in your next Self-assessment after consulting a tax professional.
4. Report everything accurately.

Key Dates and Deadlines

Ø  TRF window: 6 April 2025 – 5 April 2028

Ø  Designations for 2025/26 can be made up to 31 January 2028

Ø  Filing deadlines follow standard Self-Assessment dates

Risks, Limitations & Compliance Requirements

While TRF is generous, it’s not risk-free:

Ø  Errors in designation or fund classification may lead to higher taxation

Ø  Breaches in TRF Capital Account rules can attract penalties

Ø  Documentation must be robust and defensible under HMRC scrutiny

Ø  Mixing TRF-designated funds with other assets may trigger penalties (up to 30% of tax due)

Reporting Requirements

TRF designations must be made in the self-assessment tax return. Supporting evidence, including transaction trials and classification of funds, should be maintained. HMRC may request further clarification if there are inconsistencies.

Real-World Application: The Case of Emma

Background:

Emma is a long-term UK resident who previously claimed the remittance basis. As of 6 April 2025, she holds £750,000 in a mixed offshore account, comprising:

£250,000 of pre-6 April 2025 untaxed foreign income (e.g., dividends, rental income).

£300,000 of pre-6 April 2025 unrealized capital gains.

£200,000 of original untaxed capital.

TRF Strategy:

Eligibility Check: Emma qualifies for the TRF because she used the remittance basis in 2024/25.

Designation Analysis:

Under HMRC’s "first-in-first-out" (FIFO) rule, any TRF designation automatically draws from the oldest unremitted income first.

Emma designates £400,000 in her 2025/26 Self-Assessment, which is treated as:

£250,000 (all pre-2025 income taxed at 12% = £30,000).

£150,000 (pre-2025 gains taxed at 12% = £18,000).

Note: The remaining £50,000 of her designation cannot be allocated to income/gains (only capital), so it is not taxable under TRF.

Tax Outcome:

Total TRF tax due (2025/26): £48,000 (£30k + £18k).

Payment deadline: Must be paid by 31 January 2027, even if the funds stay offshore.

Vs. Standard Rules: If Emma remitted the £250,000 income without TRF, it could face 45% income tax (£112,500) + 24% CGT on gains (£36,000) = £148,500. TRF saves £100,500.

Compliance Considerations:

Emma segments the £400,000 in a separate account to avoid mixing with non-TRF funds (preventing accidental breaches).

She retains documentation proving the origin of the £250,000 income and £150,000 gains (e.g., bank statements, trust distributions).

If she later remits the £400,000 to the UK, no additional UK tax is due (TRF liability is settled).

Final Thoughts: Strategic Planning & Expert Guidance

The Temporary Repatriation Facility presents a timely and valuable route for UK-resident Non-Doms to declare overseas assets on favorable terms. With concessional rates and flexible designation rules, it offers an ideal opportunity to simplify complex global finances. However, the process involves technicalities that require careful navigation and, in most cases, professional support.

If you’re considering the TRF, now is the time to act. Understand your position and partner with a trusted advisor. Water and Shark’s international tax team can assist you with evaluating eligible funds, setting up TRF capital accounts, and ensuring accurate designation and reporting. With expert guidance, you can make full use of this three-year opportunity while staying compliant and maximizing tax efficiency.

Frequently Asked Questions (FAQs)

1. Who can use the Temporary Repatriation Facility (TRF) in the UK?
UK tax residents who previously claimed the remittance basis (up to 2024/25) or who receive trust distributions of pre-6 April 2025 funds during the TRF period are eligible.

2. Do I need to bring money into the UK to qualify for TRF?
No. Funds can remain offshore. The TRF applies to designated funds whether or not they are physically remitted to the UK.

3. What tax rate applies under TRF?
TRF applies a concessional tax rate: 12% for designations made in 2025/26 and 2026/27, and 15% for 2027/28.

4. What happens if I mix TRF-designated funds with non-TRF funds?
Mixing designated and non-designated funds can trigger standard remittance rules and HMRC penalties, so separation is essential.

5. How do I report TRF designations?
You must declare them in your Self-Assessment return for the relevant year. Supporting documents and clear segregation of funds are vital for compliance.