SolvedSchedule 10 | Temporary repatriation facility
From legislation.gov.uk
Part 1Temporary repatriation facility charge
(1)This Part of this Schedule sets out a charge on amounts of qualifying overseas capital of individuals previously subject to the remittance basis.
(2)The charge is to be known as the temporary repatriation facility charge, and is referred to in this Schedule as the “TRF charge”.
(3)Paragraphs 2 to 6 set out when amounts are, or are to be treated, as qualifying overseas capital.
(4)Amounts of qualifying overseas capital of an individual are subject to the TRF charge only if the individual designates them in accordance with this Part of this Schedule.
(5)An individual may only designate qualifying overseas capital if the individual was subject to the remittance basis for at least one tax year (being a tax year before the tax year 2025-26).
(6)An individual designates qualifying overseas capital by making an election (a “designation election”) in a return for the tax year 2025-26, 2026-27 or 2027-28 (see paragraph 8 for further provision about designation elections).
(7)A designation election may only be made in a return if, for the tax year to which the return relates, the individual is UK resident for the purposes of income tax and capital gains tax (see Schedule 45 to FA 2013).
(8)The amount of the TRF charge on qualifying overseas capital designated by an individual is—
(a)in the case of amounts of qualifying overseas capital designated in a return for the tax year 2025-26 or 2026-27, the amount equal to 12% of the amount of that capital, and
(b)in the case of amounts of qualifying overseas capital designated in a return for the tax year 2027-28, the amount equal to 15% of the amount of that capital.
(9)Part 2 of this Schedule sets out exemptions and reliefs from income tax and capital gains tax that apply where amounts of qualifying overseas capital are designated.
(10)Part 3 of this Schedule amends or modifies rules about the remittance of amounts where an individual has designated qualifying overseas capital.
(11)For the purposes of this Part of this Schedule—
(a)an individual is subject to the remittance basis for a tax year—
(i)in relation to the tax years 2008-09 to 2024-25, if any of sections 809B, 809D or 809E of ITA 2007 apply to the individual for that year, or
(ii)in relation to any tax year before 2008-2009, if any income or gains of the individual for that year were subject to the remittance basis (including any income or gains that would have been regarded as arising in the tax year but were not as a result of the application of the remittance basis), and
(b)“return” means a return under section 8 of TMA 1970 (personal return for income tax and capital gains tax), and
(c)references to an election being included in a return include an election being so included as a result of an amendment of the return.
(1)An amount of capital is “qualifying overseas capital” of an individual if it falls within sub-paragraph (2), (5) or (8).
(2)An amount of capital falls within this sub-paragraph if—
(a)it is an amount that arose in the tax year 2024-25 or an earlier tax year as income or as a gain,
(b)the amount has not been remitted to the United Kingdom, and
(c)the amount, if remitted to the United Kingdom, would have the effect mentioned in sub-paragraph (3)(a) or (b).
(3)That effect is that—
(a)the individual becomes chargeable to income tax by reference to the amount remitted in accordance with section 22, 26, 41F, 554Z9 or 554Z10 of ITEPA 2003 or section 832 of ITTOIA 2005 (income charged on remittance basis), or
(b)a gain is treated as accruing to the individual by reference to the amount remitted in accordance with paragraph 1(2) of Schedule 1 to TCGA 1992 (gains charged on remittance basis).
(4)In determining whether an amount of capital falls within sub-paragraph (2) for the purposes of making a designation election for a tax year, the condition in sub-paragraph (2)(b) is to be regarded as met if it was met at the end of that tax year.
(5)An amount of capital falls within this sub-paragraph if—
(a)it is an amount that arose in the tax year 2024-25 or an earlier tax year as income or as a gain,
(b)the amount is remitted to the United Kingdom in the tax year 2025-26, 2026-27 or 2027-28, and
(c)that remittance has the effect mentioned in sub-paragraph (3)(a) or (b).
(6)An amount that is qualifying overseas capital falling within sub-paragraph (5) (and that has not previously been designated as result of the amount falling within sub-paragraph (2)) may only be designated in a designation election for the tax year in which it was remitted.
(7)For the purposes of sub-paragraphs (2)(c) and (5)(c), a remittance is to be treated as having the effect mentioned in sub-paragraph (3)(a) or (b) if it would have that effect ignoring—
(a)Part 2 of this Schedule (exemptions etc for designated qualifying overseas capital),
(b)section 809VA of ITA 2007 (business investment relief), and
(c)section 809X of that Act (exempt property).
(8)An amount of capital falls within this sub-paragraph if—
(a)it does not fall within sub-paragraph (2) or (5),
(b)it was held by the individual immediately before 6 April 2025,
(c)it was situated outside the United Kingdom—
(i)immediately before it was most recently acquired by the individual before that date, and
(ii)throughout the period beginning with the time referred to in sub-paragraph (i) and ending with that date.
(9)References in Parts 1 and 2 of this Schedule to amounts being remitted to the United Kingdom are to be construed in accordance with Chapter A1 of Part 14 of ITA 2007 (see, in particular, sections 809L to 809O of that Act).
(1)This paragraph applies for the tax year 2025-26, 2026-27 or 2027-28 in relation to an individual if—
(a)chargeable gains are treated as accruing to the individual in that tax year as a result of section 87(2) or 89(2) of TCGA 1992 in relation to a capital payment from the trustees of a settlement for which the individual is a beneficiary, and
(b)the settlement has a section 1(3) amount that is greater than nil for one or more tax years before 2025-26.
(2)So much of the payment as is matched with section 1(3) amounts for tax years before 2025-26 is qualifying overseas capital.
(3)For the purposes of matching those amounts, apply section 87A of TCGA 1992 as if—
(a)the section 1(3) amount for each tax year after the tax year 2024-25 were nil, and
(b)the reference in Step 2 in subsection (2) of section 87A of that Act to the total amount of capital payments received by the beneficiaries were to the total amount of capital payments—
(i)received by the individual and other beneficiaries that are qualifying individuals for the relevant tax year, and
(ii)to which section 87(2) or 89(2) of that Act applies.
(4)For the purposes of this paragraph, ignore any reduction of a section 1(3) amount for the tax year 2024-25 or an earlier tax year resulting from the application of section 87 or 89(2) of TCGA 1992 in the tax year 2025-26 or any subsequent tax year.
(5)Sub-paragraph (6) applies where—
(a)an amount of a capital payment has been matched with a section 1(3) amount under sub-paragraph (2), and
(b)that amount is designated as designated qualifying overseas capital.
(6)The section 1(3) amount is to be taken to have been reduced (but not below nil) by so much of it as matches with the capital payment for the purposes of any subsequent application of this paragraph.
(7)This paragraph is not to be taken as affecting the application of section 87A of TCGA 1992 for any purpose other than for the purposes of this paragraph and paragraph 5 (and no section 1(3) amounts or capital payments are to be taken to have been reduced as a result of the application of this paragraph for any other purpose).F1
(8)For the purposes of this paragraph—
(a)“section 1(3) amount” has the meaning it has in section 87 of TCGA 1992, and
(b)section 97 of TCGA 1992 (supplementary provisions) applies as it applies for the purposes of sections 86A to 96 of that Act.
(9)For the purposes of this paragraph, and paragraph 5, an individual is a qualifying individual in a tax year if the individual—F2
(a)is UK resident for the purposes of income tax and capital gains tax for that tax year, and
(b)was subject to the remittance basis for at least one tax year (being a tax year before the tax year 2025-26).
(4)RepealedF3
(1)This paragraph applies for the tax year 2025-26, 2026-27 or 2027-28 in relation to an individual if—
(a)chargeable gains are treated as accruing to the individual in that tax year as a result of paragraph 8(1) of Schedule 4C to TCGA 1992 in relation to a capital payment from the trustees of a relevant settlement for which the individual is a beneficiary, and
(b)the section 1(3) amount in the Schedule 4C pool is greater than nil for one or more tax years before 2025-26.
(2)So much of the payment as is matched with section 1(3) amounts in the Schedule 4C pool for tax years before 2025-26 is qualifying overseas capital.
(3)For the purposes of matching those amounts, apply section 87A of TCGA 1992 as if—
(a)the section 1(3) amount in the Schedule 4C pool for each tax year after the tax year 2024-25 were nil, and
(b)the reference in Step 2 in subsection (2) of section 87A of that Act to the total amount of capital payments received by the beneficiaries were to the total amount of capital payments—
(i)received by the individual and other beneficiaries that are qualifying individuals for the relevant tax year, and
(ii)to which paragraph 8(1) of Schedule 4C to that Act applies in relation to section 1(3) amounts in the Schedule 4C pool.
(4)For the purposes of this paragraph, ignore any reduction of a section 1(3) amount in the Schedule 4C pool for the tax year 2024-25 or an earlier tax year resulting from the application of paragraph 8(1) of Schedule 4C to TCGA 1992 in the tax year 2025-26 or any subsequent tax year.
(5)Sub-paragraph (6) applies where—
(a)an amount of a capital payment has been matched with a section 1(3) amount in the Schedule 4C pool under sub-paragraph (2), and
(b)that amount is designated as designated qualifying overseas capital.
(6)The section 1(3) amount in the Schedule 4C pool is to be taken to have been reduced (but not below nil) by so much of it as matches with the capital payment for the purposes of any subsequent application of this paragraph.
(7)This paragraph is not to be taken as affecting the application of section 87A of TCGA 1992 for any purpose other than for the purposes of this paragraph and paragraph 3 (and no section 1(3) amount in the Schedule 4C pool or capital payments are to be taken to have been reduced as a result of the application of this paragraph for any other purpose).F4
(8)For the purposes of this paragraph—
(a)“section 1(3) amount in the Schedule 4C pool” and “relevant settlement” are to be construed in accordance with Schedule 4C to TCGA 1992, and
(b)section 97 of TCGA 1992 (supplementary provisions) applies as it applies for the purposes of sections 86A to 96 of that Act.
(1)This paragraph applies—
(a)where an individual is treated as having an amount of income as a result of section 643A of ITTOIA 2005 (benefits paid out of protected foreign-source income or transitional trust income) for any of the tax years 2025-26, 2026-27 or 2027-28,
(b)where an individual would have been treated as having an amount of income as a result of any other provision of Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor or family) in the tax year 2024-25 or an earlier tax year but was not only as a result of the application of section 648(3) of that Act (relevant foreign income treated as arising under settlement only if and when remitted), or
(c)where—
(i)an individual is treated as having an amount of income for any of the tax years 2025-26, 2026-27 or 2027-28 as a result of section 732 of ITA 2007 (individuals receiving a benefit as a result of relevant transactions),
(ii)under section 735A of that Act (if it applied also for this purpose) that amount would be matched with relevant income that arose in the tax year 2024-25 or an earlier tax year, and
(iii)that amount would have been treated as relevant foreign income of the individual if it had been treated as accruing in the tax year 2024-25 and the individual had been subject to the remittance basis for that tax year.
(2)An amount of income falling within paragraph (a), (b) or (c) of sub-paragraph (1) is to be treated as an amount of qualifying overseas capital of the individual.
(3)An amount of income treated as qualifying overseas capital falling within sub-paragraph (1)(a) or (c) may only be designated in a return for the tax year in which the income was treated as arising to the individual.
(4)For the purposes of this paragraph “relevant foreign income” has the meaning it has in the Income Tax Acts.
(1)Sub-paragraph (2) applies where—
(a)an individual is treated as having an amount of income for any of the tax years 2025-26, 2026-27 or 2027-28 as a result of section 732 of ITA 2007 (individuals receiving a benefit as a result of relevant transactions),
(b)the amount of income does not fall within paragraph 6(1)(c), and
(c)the benefit by reference to which that income is treated as arising would, if it were not chargeable to income tax, be an amount of qualifying overseas capital of the individual by virtue of paragraph 3 or 5 (capital payments).
(1A)For the purposes of applying those paragraphs for the purposes of sub-paragraph (1)(c)—F5
(a)those paragraphs have effect as if—F5
(i)for sub-paragraph (1)(a) (in each paragraph) there were substituted—F5
(a)an individual is treated as having an amount of income for any of the tax years 2025-26, 2026-27 or 2027-28 as a result of section 732 of ITA 2007 (individuals receiving a benefit as a result of relevant transactions),
,
(ii)the reference in sub-paragraph (2) (in each paragraph) to “the payment” were to the benefit by reference to which the income is treated as arising,F5
(iii)sub-paragraph (3)(b)(ii) (in each paragraph) were omitted, andF5
(iv)the references in each paragraph, and in section 87A of TCGA 1992 as applied by those paragraphs, to “capital payments” were to benefits falling within sub-paragraph (1)(c) of this paragraph, andF5
(b)those paragraphs are to be applied after they have been applied for the purposes of determining whether any amount of a capital payment is qualifying overseas capital.F5
(2)The amount is to be treated as an amount of income of qualifying overseas capital of the individual.F6
(3)The amount may only be designated in a return for the tax year in which the income was treated as arising to the individual.
(1)A designation election for a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year.
(2)The designation must—
(a)set out the total amount designated, ...F7
(aa)for each amount designated, whether or not it is designated on the basis it is qualifying overseas capital as a result of a remittance provision, andF8
(b)identify which (if any) of the amounts designated on that basis have been remitted in the tax year to which the return relates.F9
(2A)For the purposes of designating an amount of qualifying overseas capital of an individual that—F10
(a)is qualifying overseas capital as a result of paragraph 2(2) or (5), orF10
(b)is treated as qualifying overseas capital as a result of paragraph 6(1)(b),F10
the value of that amount is the value of the amount when it first arose to the individual.
(2B)In this Part and in Part 2 “remittance provision” means paragraph 2(2) or (5) or paragraph 6(1)(b).F11
(2C)Where—F11
(a)an amount is designated on the basis it is qualifying overseas capital as a result of a remittance provision, andF11
(b)the amount would (ignoring this sub-paragraph) also be regarded as designated under paragraph 3 or 5 (matched capital payments),F11
it is not to be regarded as designated under that paragraph for the purposes of paragraph 10(7) (relief for offshore income gains) or paragraph 13 (relief for matched capital payments) as a result of that designation on that basis.
(2D)Accordingly two designations of the amount are required to secure the benefit of all of the reliefs that may be available under paragraphs 10(1), 10(7),12(1) and 13—F11
(a)one designation of the amount on the basis it is qualifying overseas capital as a result of a remittance provision, andF11
(b)another not on that basis.F11
(3)Where an amount of relevant foreign tax has been paid, or is payable, in respect of an amount of qualifying overseas capital, only so much of the amount as remains after deducting the amount of relevant foreign tax paid, or payable, may be designated.
(4)For the purposes of this paragraph, relevant foreign tax means a tax imposed by the law of a territory outside the United Kingdom that corresponds to—
(a)income tax, or
(b)capital gains tax.
(4A)But where—F12
(a)an amount of relevant foreign tax has been paid, or will be paid, in respect of an amount of qualifying overseas capital (“the related qualifying overseas capital”), andF12
(b)it has been, or will be, paid out of funds other than the related qualifying overseas capital,F12
sub-paragraph (3) does not apply to the related qualifying overseas capital to the extent that the tax has been, or will be, paid out of those funds.
(5)An individual may designate an amount where it has not yet been determined—
(a)whether the amount is qualifying overseas capital, or
(b)whether, or to what extent, relevant foreign tax is, or was, payable in respect of the amount.
(5A)Where the individual considers that an amount designated under sub-paragraph (5) could, if it were qualifying overseas capital, be designated on the basis that it is qualifying overseas capital as a result of a remittance provision, the individual may designate it on that basis.F13
(6)An amount designated—
(a)that is determined to not be qualifying overseas capital, or
(b)that should not have been designated as a result of sub-paragraph (3),
is to be nevertheless treated as designated qualifying overseas capital, other than for the purpose of Part 2 of this Schedule (exemptions etc).
(6A)Sub-paragraph (6B) applies where—F14
(a)an amount (“the TRF amount”) is treated as designated qualifying overseas capital of an individual as a result of sub-paragraph (6),F14
(b)on or after 6 April 2025, an officer of Revenue and Customs, in relation to the tax year 2024-25 or an earlier tax year—F14
(i)amends the individual’s self-assessment while an enquiry under section 9A of TMA 1970 (enquiry into return) into the individual’s return for that tax year is in progress,F14
(ii)issues a partial or final closure notice under section 28A of that Act (completion of enquiry) in relation to that return, orF14
(iii)makes an assessment under section 29 of that Act, andF14
(c)the effect of the officer taking that step is that income tax or capital gains tax is charged in respect of the TRF amount.F14
(6B)The amount of income tax or capital gains tax due and payable under section 59B of TMA 1970 in respect of the TRF amount is to be treated as reduced (but not below nil) by the amount of the TRF charge paid in respect of the TRF amount.F14
(6C)Where sub-paragraph (6B) applies, the individual may not amend the return in which the designation election relating to the TRF amount was included to alter or revoke that election (if the return otherwise could have been amended) so as to cause the TRF amount not to be designated.F14
(7)Where an amount is designated, it is treated as designated qualifying overseas capital from the beginning of the tax year to which the return in which it is designated relates.
(8)An individual who makes a designation election must keep a record of each amount designated.
(1)An amount of designated qualifying overseas capital is chargeable to the TRF charge for the tax year to which the return in which it is designated relates.
(2)Amounts of TRF charge are to be charged as if they were amounts of income tax.
(3)Section 23 of ITA 2007 (calculation of income tax liability) applies in relation to a person liable to the TRF charge as if paragraph 1(8) were included in the lists of provisions in section 30(1) of that Act (amounts of tax added at Step 7).
(4)For the purposes of the collection and management of the TRF charge, all other enactments applying generally to income tax apply to the TRF charge.
(5)Those enactments include—
(a)those relating to returns of information and the supply of accounts, statements and reports,
(b)those relating to the assessing, collecting and receiving of income tax,
(c)those conferring or regulating a right of appeal, and
(d)those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.
(6)But section 59A of TMA 1970 (payments on account of income tax) does not apply in relation to amounts of TRF charge.
(7)For the purposes of section 12B of TMA 1970 (as applied as a result of sub-paragraph (4)), the records required to be kept as a result of paragraph 8(8) are to be regarded as records that must be kept for the purposes of enabling an individual to make and deliver a correct and complete return.
(8)Paragraph 8(6) is not to be taken as preventing the amendment of a return so as to alter or revoke a designation of qualifying overseas capital made in that return, provided that amendment is made in accordance with section 9ZA of TMA 1970 (taxpayer permitted to amend return within 12 months of filing date).F15
Part 2Exemptions etc for designated qualifying overseas capitalF16F17
(1)No liability to income tax arises on
(a)the remittance of an amount of designated qualifying overseas capital that is designated on the basis that it is qualifying overseas capital as a result of a remittance provision , orF18F19F20
(b)an amount of income treated as qualifying overseas capital under paragraph 6 that—F20
(i)falls within sub-paragraph (1)(b) of that paragraph, andF20
(ii)is designated on the basis that it is qualifying overseas capital as a result of a remittance provision.F20
(2)No liability to income tax arises on an amount of income treated as qualifying overseas capital under paragraph 6 , and that falls within sub-paragraph (1)(a) or (c) of that paragraph, if the amount is designated.F21
(3)But such an amount is to be treated for the purposes of section 97(1) of TCGA 1992 (capital payments not to include amounts chargeable to income tax) as if it were chargeable to income tax.
(4)No liability to income tax arises on an amount of income treated as qualifying overseas capital under paragraph 7 if the amount is designated.
(5)Accordingly the amount—
(a)will be a capital payment for the purposes of sections 86A to 96 of, and Schedule 4C to, TCGA 1992 (see section 97(1) of that Act), and
(b)will, as a result of paragraph 3 or 5 (or both), be qualifying overseas capital.
(6)Any such qualifying overseas capital is to be treated as having been designated by the individual (under that paragraph or those paragraphs), but no liability to the TRF charge is to arise as a result of that deemed designation.
(7)RepealedF22
(8)RepealedF23
(9)This paragraph has effect for the tax year 2025-26 and subsequent tax years.
(1)This paragraph applies where an amount of income that is treated as arising to an individual under section 732 of ITA 2007 (“the deemed income”) is exempt from income tax by virtue of paragraph 10.
(2)If the deemed income is qualifying overseas capital by virtue of paragraph 6(1)(c), Chapter 2 of Part 13 of ITA 2007 has effect as though the deemed income had been charged to tax under section 731 of that Act.
(3)Accordingly—
(a)in the application of section 733(1) of ITA 2007 to the individual for subsequent tax years, the amount of the deemed income will be deducted at Step 2 and at paragraph (a) of Step 5, and
(b)in the application of section 733(1) of ITA 2007 to any other individual for subsequent tax years, the amount of the deemed income will be deducted at paragraph (b) of Step 5.
(4)If the deemed income is qualifying overseas capital by virtue of paragraph 7, Chapter 2 of Part 13 of ITA 2007 has effect as though the benefit by reference to which the deemed income was treated as arising had never been provided.
(5)Accordingly, in the application of section 733(1) of ITA 2007 to any individual for subsequent tax years—
(a)that benefit will not be taken into account at Step 1,
(b)no deduction in respect of the deemed income will be made at Step 2 or Step 5, and
(c)the total untaxed benefits will not be reduced in respect of that benefit by virtue of section 734 (previous capital gains charge).
(1)No gain is treated as accruing under paragraph 1(2) of Schedule 1 to TCGA 1992 on the remittance of an amount of designated qualifying overseas capital that is designated on the basis that it is qualifying overseas capital as a result of a remittance provision (other than paragraph 6(1)(b)).F24
(2)This paragraph has effect for the tax year 2025-26 and subsequent tax years.
(1)Sub-paragraph (2) applies where—
(a)chargeable gains are treated as accruing to an individual in a tax year under section 87(2) or 89(2) of TCGA 1992 as a result of a capital payment made to an individual by the trustees of a settlement, and
(b)an amount of that capital payment is qualifying overseas capital that has been designated by the individual under paragraph 3.
(2)The gains are to be reduced by the amount of that designated qualifying overseas capital.
(3)Sub-paragraph (4) applies where—
(a)an individual is charged to capital gains tax by virtue of the matching (under section 87A of TCGA 1992) of a capital payment with the section 1(3) amount for the tax year 2024-25 or any earlier tax year,
(b)section 91(2) of TCGA 1992 (increase of tax where capital payment matched to section 1(3) amount for earlier tax year) would (ignoring sub-paragraph (4)) apply in relation to the capital payment mentioned in paragraph (a),
(c)an amount of a capital payment (which may or may not be the payment mentioned in paragraph (a)) is qualifying overseas capital that has been designated by the individual, and
(d)the amount designated is qualifying overseas capital as a result of the fact it would, in accordance with paragraph 3(2), be matched with the section 1(3) amount mentioned in paragraph (a).
(4)Section 91(2) of TCGA 1992 does not apply to capital gains tax payable by the individual in respect of so much of the capital payment mentioned in sub-paragraph (3)(a) as is matched with the amount of the section 1(3) amount as would also, in accordance with paragraph 3(2), be matched with the amount of a capital payment mentioned in sub-paragraph (3)(c).
(5)Sub-paragraph (6) applies where—
(a)chargeable gains are treated as accruing to an individual in a tax year under paragraph 8(1) of Schedule 4C to TCGA 1992 as a result of a capital payment made to an individual by the trustees of a settlement, and
(b)an amount of that capital payment is qualifying overseas capital that has been designated by the individual under paragraph 5.
(6)The gains are to be reduced by the amount of that designated qualifying overseas capital.
(7)Sub-paragraph (8) applies where—
(a)an individual is charged to capital gains tax by virtue of the matching (under section 87A of TCGA 1992 as it has effect for the purposes of paragraph 8(3) of Schedule 4C to that Act) of a capital payment with the section 1(3) amount in the Schedule 4C pool for the tax year 2024-25 or any earlier tax year,
(b)paragraph 13(2) of Schedule 4C to that Act (increase of tax where capital payment matched to section 1(3) amount for earlier tax year) would (ignoring sub-paragraph (8)) apply in relation to the capital payment mentioned in paragraph (a),
(c)an amount of a capital payment (which may or may not be the payment mentioned in paragraph (a)) is qualifying overseas capital that has been designated by the individual, and
(d)the amount designated is qualifying overseas capital as a result of the fact it would, in accordance with paragraph 5(2), be matched with the section 1(3) amount mentioned in paragraph (a).
(8)Paragraph 13(2) of Schedule 4C to TCGA 1992 does not apply to capital gains tax payable by the individual in respect of so much of the capital payment mentioned in sub-paragraph (7)(a) as is matched with the amount of the section 1(3) amount in the Schedule 4C pool as would also, in accordance with paragraph 5(2), be matched with the amount of a capital payment mentioned in sub-paragraph (7)(c).
(9)For the purposes of this paragraph—
(a)“section 1(3) amount” has the meaning it has in section 87 of TCGA 1992;
(b)“section 1(3) amount in the Schedule 4C pool” is to be construed in accordance with Schedule 4C to TCGA 1992.
(10)This paragraph has effect for the tax year 2025-26 and subsequent tax years.
(1)This paragraph applies to an amount (“amount A”) if—F16
(a)either—F16
(i)the remittance of the amount to the United Kingdom would have the effect mentioned in paragraph 2(3)(a) or (b) by reference to income or gains, orF16
(ii)the remittance of the amount would result in income being treated as arising to a settlement in accordance with section 648(3) (and accordingly would result in an amount falling within paragraph 6(1)(b) arising), andF16
(b)the remittance of an amount (“amount B”) of designated qualifying overseas capital to the United Kingdom would have one of the effects mentioned in paragraph (a)(i) or (ii) by reference to that same income or those same gains (“the reference income or gains”) if it had not been designated.F16
(2)Where amount A falls within sub-paragraph (1)(a)(i), so much of amount A (so far as it relates to the reference income or gains) as does not exceed amount B (so far as it relates to the reference income or gains) is to be treated—F16
(a)as designated qualifying overseas capital, andF16
(b)as designated on the basis it is qualifying overseas capital as a result of a remittance provision.F16
(3)Where amount A falls within sub-paragraph (1)(a)(ii), so much of the amount falling within paragraph 6(1)(b) as would result from the remittance of amount A as does not exceed amount B (so far as it relates to the reference income or gains) is to be treated—F16
(a)as designated qualifying overseas capital, andF16
(b)as designated on the basis it is qualifying overseas capital as a result of a remittance provision.F16
(1)The effects of Parts 1 and 2 of this Schedule are to be ignored for the purposes of section 65(5)(b) of IHTA 1984 (and accordingly will not prevent any amount being regarded as income of a person for the purposes of income tax for the purposes of that section).F17
(2)Where—F17
(a)the trustees of a settlement make a capital payment to an individual,F17
(b)the making of that payment results in the individual having qualifying overseas capital,F17
(c)that qualifying overseas capital is designated,F17
so much of the deemed disposal under section 71 of TCGA 1992 arising on the making of the payment as reflects the designated qualifying overseas capital is (despite sub-paragraph (1)) treated as a chargeable transfer within the meaning of IHTA 1984 for the purposes only of section 260(2)(a) of TCGA 1992 (gifts on which inheritance tax is chargeable etc).
Part 3Effect of designation on when amounts remitted etc
(14)Section 809I of ITA 2007 (remittance basis charge: income and gains treated as remitted) does not apply for a tax year in relation to an individual if—
(a)the tax year is tax year 2025-26, 2026-27 or 2027-28,
(b)the individual—
(i)makes a designation of qualifying overseas capital for that tax year, or
(ii)has made such a designation for a previous tax year, and
(c)that section has not applied in relation to that individual for the tax year 2024-25 or an earlier tax year.
(1)Section 809Q of ITA 2007 is amended as follows.
(2)In subsection (3)—
(a)before Step 1 insert—, and
(b)in Steps 2 to 4, and in the first sentence in Step 5, for “transfer”, in each place it occurs, substitute “remainder”.
(3)In subsection (6)—
(a)omit the “or” after paragraph (a), and
(b)after paragraph (b) insert
(c)income or capital that is TRF capital and income or capital that is not TRF capital.
(4)After subsection (8) insert—
(9)For the purposes of this Chapter “TRF capital” means any amount that—
(a)is qualifying overseas capital (within the meaning of Part 1 of Schedule 10 to FA 2025) as a result of paragraph 2 of that Schedule, and
(b)is designated qualifying overseas capital for the purposes of that Part of that Schedule (and see paragraph 8(7) which provides for qualifying overseas capital to be treated as designated qualifying overseas capital from the start of the tax year to which the return in which it is designated relates).
(5)In section 809Z10 of ITA 2007 (general interpretation), after the definition of “the remittance basis user” insert—
(1)Section 809R of ITA 2007 is amended as follows.
(2)In subsection (1), for “This section applies” substitute “Subsections (2) to (8) apply”.
(3)After subsection (4) insert—
(4A)For the purposes of subsection (4)—
(a)TRF capital is to be treated as a kind of income or capital, and
(b)TRF capital is not to be regarded as any other kind of income or capital.
(4)In subsection (5) for “section 809Q does not apply” substitute “neither section 809Q nor section 809RZA(2) applies”.
(5)In subsection (6)—
(a)in the words before paragraph (a), for “section 809Q as not applying in relation to it, if it” substitute “neither section 809Q nor section 809RZA(2) as applying in relation to it, if they”, and
(b)in paragraph (a), for “section 809Q does not apply” substitute “neither section 809Q nor section 809RZA(2) applies”.
(6)In subsection (7)—
(a)omit the “or” after paragraph (a), and
(b)after paragraph (b) insert
(c)income or capital that is TRF capital and income or capital that is not TRF capital.
(7)In subsection (9)—
(a)for “step 1” substitute “steps A1 and 1”, and
(b)for “step 2” substitute “steps A1 and 2”.
(17)After section 809R of ITA 2007 insert—
809RZATransfers into TRF capital account
(1)Subsection (2) applies to a transfer made from a mixed fund if—
(a)it is made from a mixed fund that contains TRF capital,
(b)the transfer is to a TRF capital account, and
(c)the amount of the transfer does not exceed the amount of TRF capital in the mixed fund at the time of the transfer.
(2)The transfer is to be treated as a transfer of TRF capital.
(3)Where subsection (2) would apply to a transfer but does not because of paragraph (c) of subsection (1)—
(a)that transfer is to be treated as two separate transfers occurring one immediately after the other, and
(b)the first of those transfers is to be treated as being in the amount of TRF capital in the mixed fund (and accordingly subsection (2) will apply to that deemed transfer but not the second, which may result in the TRF capital account ceasing to be a TRF capital account).
(4)Section 809RZB makes provision about the nomination of an account as a TRF capital account (and see sections 809RZC and 809RZD for the effect of making a transfer that contains amounts that are not TRF capital).
809RZBTRF capital account
(1)An individual may by notice to the Commissioners nominate an account to be a TRF capital account (and more than one nomination may have effect at any time).
(2)The notice must specify the qualifying date for the account.
(3)“The qualifying date” for the account is the first date on which there is paid into the account sums falling within subsection (4) which (in total) are more than £10 at a time when the credit balance of the account was £10 or less.
(4)A sum falls within this subsection if it is TRF capital.
(5)The individual may withdraw the nomination by giving a further notice to the Commissioners, specifying the date with effect from which the nomination is withdrawn.
(6)A notice under subsection (1) or (5) must be in writing and include such information as the Commissioners may reasonably require.
(7)A notice under subsection (1) or (5) must be given no later than—
(a)31 January in the tax year following the tax year in which falls, as the case may be—
(i)the qualifying date for the account, or
(ii)the date with effect from which the nomination is withdrawn, or
(b)such later date as the Commissioners may allow.
(8)If an individual nominates an account under this section, the account is a “TRF capital account” of the individual throughout the period—
(a)beginning with the qualifying date, and
(b)ending with the date before the earliest of the following dates—
(i)the date on which the account is closed or ceases to be an ordinary bank account held by and for the benefit of the individual (alone or jointly with others);
(ii)the date with effect from which the nomination is withdrawn under this section;
(iii)6 April in a tax year in which there is a breach of the TRF deposit rule which is not remedied or cannot be remedied.
(9)The account is not to be a TRF capital account at all if—
(a)at any time on the qualifying date, the account is not an ordinary bank account held by and for the benefit of the individual (alone or jointly with others), or
(b)immediately before the qualifying date, the account has a credit balance of more than £10.
(10)Where the account has a credit balance immediately before the qualifying date (which must be £10 or less), that balance is to be treated as TRF capital for the purposes of this Chapter.
(11)Where interest is payable on TRF capital held in the TRF capital account, any such interest paid into the account is to be treated as TRF capital for the purposes of this Chapter.
(12)The account is not to be a TRF capital account at all if the qualifying date falls in a tax year in which there is a breach of the TRF deposit rule which is not remedied or cannot be remedied.
(13)Subsection (8)(b)(iii) or (12) (as relevant) is to be ignored if the breach occurs on or after a date falling within subsection (8)(b)(i) or (ii).
(14)For the purposes of this section an account is an “ordinary bank account” if it is a cash account in a bank (whether a current or savings account) where sums standing to the credit of the account from time to time represent a debt owed by the bank to the account-holder.
(15)In this section, and in sections 809RZC and 809RZD, a reference to anything “paid into” an account includes anything credited to the account by whatever means.
809RZCBreaches of the TRF deposit rule
(1)There is a breach of the TRF deposit rule if one or more prohibited sums are paid into a TRF capital account on the qualifying date or any day after the qualifying date.
(2)A breach of the TRF deposit rule is remedied if, within 30 days beginning with the day on which the prohibited sums are paid into the account, the required amount is transferred out of the account by way of a single one-off qualifying transfer.
(3)A transfer is “qualifying” if it does not result in the remittance of any amount to the United Kingdom.
(4)“The required amount” is an amount equal to the total of the prohibited sums paid into the TRF capital account on the day of the breach.
(5)If there are 2 days in a tax year on which one or more breaches of the TRF deposit rule occur, subsection (2) does not apply to any breach on any subsequent day in the tax year (and accordingly any breach occurring on any day after the second day in the tax year on which there has been a breach cannot be remedied).
(6)A “prohibited sum” is anything other than a sum that is TRF capital.
809RZDEffect where 30-day deadline is met
(1)This section applies if the required amount in relation to a breach of the TRF deposit rule was transferred out of the account in accordance with section 809RZC(2).
(2)Sections 809Q and 809R have effect as if—
(a)the intervening transactions had never taken place, and
(b)each prohibited sum represented by the required amount had instead been transferred directly (at the time that sum was paid into the TRF capital account) into the account or other property into which the required amount was transferred by virtue of the single one-off qualifying transfer.
(3)Each of the following is an “intervening transaction”—
(a)each payment into the TRF capital account of a prohibited sum represented by the required amount, and
(b)the single one-off qualifying transfer out of the TRF capital account.
(1)This following modifications have effect for the tax years 2025-26, 2026-27 and 2027-28.
(2)Chapter A1 of Part 14 of ITA 2007 has effect as if—
(a)after section 809R there were inserted—
809RZZAAnnualised basis for mixed funds containing TRF capital
(1)This section applies where, at any time in a tax year, a mixed fund contains TRF capital.
(2)If this section applies, the composition of each transfer made from the fund in that tax year at any time is to be determined as follows—
Step 1Suppose that all transfers made from the mixed fund to a TRF capital account in relation to which section 809RZA(2) applies had been a single transfer made from the fund at the end of the tax year.Whether that section applies in relation to transfers to a TRF capital account is determined as if all transfers from the mixed fund were made at the end of the tax year but transfers to a TRF capital account were made—
before any other transfer from the mixed fund was made, and
sequentially in the order in which the transfers to a TRF capital account were actually made.
Step 2Suppose that all the condition A transfers made from the mixed fund in the tax year had been a single transfer made at the end of the tax year immediately after the single transfer mentioned in Step 1.
Step 3Suppose that all the other transfers made from the account in the tax year had been a single offshore transfer made at the end of the tax year immediately after the single transfer mentioned in Step 2.
Step 4Applying those suppositions—
find under section 809Q(3) the content of the single transfer mentioned in Step 2, and
find under section 809R(4) the content of the single offshore transfer mentioned in Step 3.
Step 5Each transfer made from the fund in the tax year, other than a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1, is treated as containing the specified proportion of each kind of income or capital contained in the relevant deemed transfer.“The specified proportion” is the amount of the transfer divided by the amount of the relevant deemed transfer.“The relevant deemed transfer is—
if the transfer is a condition A transfer, the single transfer mentioned in Step 2, and
otherwise, the single offshore transfer mentioned in Step 3.
Step 6Each transfer made from the fund in the tax year to which section 809RZA(2) is regarded as applying in accordance with Step 1 is to be treated as a transfer to which that section applies (and no other transfer in the tax year is to be regarded as a transfer in relation to which that section applies).
(3)Subsection (2) applies in determining the composition of a transfer for the purposes of sections 809Q and 809R but it does not otherwise affect the date on which a transfer is considered to occur for the purposes of this Chapter.
(4)A transfer from the fund is a “condition A transfer” if and to the extent that—
(a)condition A in section 809L is met, and
(b)either—
(i)the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, the transfer, or
(ii)the transfer, or anything deriving (wholly or in part, and directly or indirectly) from the transfer, is used as mentioned in section 809L(3)(c).
(5)A transfer from the fund is an “other transfer” if and to the extent that it is neither a condition A transfer nor a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1.
(6)Treat a transfer as an “other transfer” if and to the extent that, at the end of the tax year—
(a)it is neither a condition A transfer nor a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1, and
(b)on the basis of the best estimate that can reasonably be made at that time, it will not become either a condition A transfer or a transfer to which section 809RZA(2) is regarded as applying in accordance with Step 1.
(7)For the purposes of Step 5 in subsection (2)—
(a)TRF capital is to be treated as a kind of income or capital, and
(b)TRF capital is not to be regarded as any other kind of income or capital.
, and
(b)in section 809RZD (as inserted by paragraph 17), at the end there were inserted—
(4)If it is supposed under Steps 1 to 3 of section 809RZZA(2) that single transfers had been made in the intervening period, re-apply those steps in relation to those transfers taking account of subsection (2) and re-apply sections 809Q and 809R accordingly.
(5)“The intervening period” is the period—
(a)beginning with the day on which the breach occurred, and
(b)ending with the day on which the single one-off qualifying transfer was made in accordance with section 809RZC(2).
(6)If more than one qualifying transfer of a sum equal to the required amount was transferred out of the TRF capital account within the 30-day grace period, the first of those transfers is assumed to be the single one-off qualifying transfer.
(7)“The 30-day grace period” is the period of 30 days mentioned in section 809RZC(2).
(1)ITA 2007 is amended as follows.
(2)In section 809VC (qualifying investments) in subsection (4), after “if” insert
(a)the investment is made before 6 April 2028,
(b)none of the money or other property used to make the investment is TRF capital, and
.
(3)In section 809VG (income or gains treated as remitted following certain events)—
(a)after subsection (6) insert—
(6A)Where—
(a)the income or gains mentioned in subsection (1)(a) include amounts designated as TRF capital (in a tax year after the tax year in which the investment is made), and
(b)the portion of the investment affected is less than the whole of the investment,
so much of the affected income or gains as does not exceed the amounts designated is to be treated as being comprised of the TRF capital.
(6B)Where section 809VO (investments made from mixed funds) applies, subsection (8) of that section applies for the purposes of determining the composition of the amount of the affected income or gains that is not treated as being comprised of TRF capital (referred to as the “relevant affected income and gains” in that subsection) as a result of—
(a)subsection (6A) of this section not applying, or
(b)that subsection only applying to a part of the affected income or gains.
,
(b)in subsection (7)—
(i)for “Sections” substitute “Section”, and
(ii)for “and 809VO (investments made from mixed funds) make” substitute “makes”, and
(c)in subsection (9), after paragraph (a) insert—
(aa)any part contained in amounts already treated as remitted under section 809VIA(4) following an earlier event,
.
(4)In section 809VN (order of disposals etc)—
(a)in subsection (2)(b), for the words from “order” to the end substitute “following order.”, and
(b)after subsection (2) insert—
(2A)The order is—
(a)so much of the qualifying investments as were made using money or other property that is designated as TRF capital (in a tax year after the tax year in which the investment is made) to the extent those qualifying investments were made using that money or other property, and then
(b)in relation to whatever remains, the order in which the qualifying investments were made (that is to say, on a first in, first out basis).
, and
(c)in subsection (4), for paragraph (b) substitute—
(b)assume that a disposal of all or part of that deemed single holding is—
(i)a disposal of so much of the deemed single holding as is from any qualifying investments that were made using money or other property that is designated as TRF capital (in a tax year after the tax year in which the investment is made) to the extent those qualifying investments were made using that money or other property, and
(ii)if any of the deemed single holding remains after the disposal referred to in sub-paragraph (i), a disposal of a holding from qualifying investments until the holdings from all the qualifying investments have been disposed of.
(5)In section 809VO (investments made from mixed funds)—
(a)for subsection (4) substitute—
(4)The “fixed proportion” is, unless subsection (4B) applies, the proportion of that kind of income or capital contained in the invested property by virtue of subsection (2).
(4A)Subsection (4B) applies, instead of subsection (3), for determining the composition of the holding in connection with the application of subsections (7) and (8) where the holding contains TRF capital (as a result of the designation of income or capital in the holding as TRF capital in the tax year after the tax year in which the relevant event occurred).
(4B)Where this subsection applies, take the following steps to determine the composition of the holding in connection with the application of those subsections—
Step 1Determine the amounts of each kind of income and capital that the holding was treated as containing by virtue of subsection (3).
Step 2Reduce the amount of each kind of income and capital by the amount (if any) of that income or capital as is TRF capital.
(4C)Where subsection (4B) applies, the “fixed proportion” is the proportion of that kind of income or capital treated as contained in the invested property by virtue of that subsection (instead of subsection (2)).
(b)in subsection (7), after “proportion” insert “(determined under subsection (4) or (4C) as the case may be)”,
(c)in subsection (8)(a)—
(i)before “affected” insert “relevant”, and
(ii)before “portion” insert “relevant proportion of the”,
(d)in subsection (8)(b), after “(3)” insert “or (4B) (as the case may be)”, and
(e)after subsection (8) insert—
(8A)For the purposes of subsection (8)(a)—
(a)the “relevant affected income or gains” means—
(i)in a case where section 809VG(6A) applies to treat some of the affected income or gains as being comprised of TRF capital, so much of the affected income or gains as is not treated as being comprised of TRF capital, or
(ii)otherwise, all of the affected income or gains, and
(b)the “relevant proportion” of the portion of the investment means—
(i)in a case where section 809VG(6A) applies to treat some of the affected income or gains as being comprised of TRF capital, the proportion of the portion of the investment that is equal to the proportion of the affected income or gains as is not treated as being comprised of TRF capital, or
(ii)otherwise, the whole of the portion of the investment.
(6)In section 809VI (the appropriate mitigation steps), in subsection (3), after “But” insert
(a)see also section 809VIA (which makes provision treating the disposal proceeds as reduced where TRF capital is involved), and
.
(7)After that section insert—
809VIAApplication of appropriate mitigation steps where TRF capital involved
(1)This section applies in relation to a potentially chargeable event where, if no appropriate mitigation steps were regarded as taken, an amount of TRF capital would (ignoring this section) be treated as remitted to the United Kingdom immediately after the end of the relevant grace period as a result of section 809VG(2).
(2)Where there has been a disposal of all or part of the holding (see section 809VI(1) or (2)(b)), so much of the proceeds of that disposal as are equal to that amount of TRF capital is to be regarded as comprising that TRF capital.
(3)Section 809VI has effect as if references in that section to the disposal proceeds did not include the TRF capital.
(4)Unless section 809VG(2) applies in relation to the potentially chargeable event, the TRF capital is to be treated as remitted to the United Kingdom at the time the potentially chargeable event occurred.
(20)Sections 397 to 398 of ITTOIA 2005 (which have been repealed and only have effect in relation to distributions made before tax year 2016-17) do not apply in relation to any amount of designated qualifying overseas capital.
(1)The amendments made by this Part of this Schedule have effect for the tax year 2025-26 and subsequent tax years.
(2)Sub-paragraph (1) does not apply to the modifications made by paragraphs 14 and 18.