RDRM74740 - Temporary repatriation facility: Scope of designation: BIR investments: Mitigation steps
Source: gov.uk (2025-04-14)


If there has been a potentially chargeable event, an individual would normally be required to take a mitigation step (see RDRM34440 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34440)) within the appropriate grace period (see RDRM34480 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34480)) to prevent a taxable remittance.

However, it is not necessary to take a mitigation step for amounts that have been designated under the TRF. Instead, amounts of TRF capital are treated as remitted immediately after the end of the relevant grace period.

Although an individual is not required to take a mitigation step, they may choose to take an amount of TRF capital offshore, if, for example, the individual has only partially designated their invested foreign income or gains (see above) but they take the full disposal proceeds offshore. In this case, the TRF capital will be treated as remitted at the time the potentially chargeable event occurred.

It is not possible to reinvest TRF capital and claim BIR on the investment, because TRF capital cannot be used to make a qualifying investment – see RDRM74760. (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74760)

Example

Raquim is UK resident and a former remittance basis user. On 1 March 2023 he invested £500,000 of his foreign income from 2021-22 into a UK company by way of a loan and claimed BIR on the investment. He has no other investments in the company or group.

In the 2025-26 tax year Raquim designates £400,000 of the invested foreign income under the TRF and pays the TRF charge of £48,000 (12% of £400,000). Therefore, Raquim’s investment comprises £400,000 of TRF capital and £100,000 of undesignated foreign income.

On 1 March 2028 Raquim receives a full repayment of the loan, £500,000, which is a disposal of his investment. The disposal proceeds of £500,000 are paid into his UK bank account and he has a grace period of 45 days, so until 15 April 2028, to take a mitigation step if he chooses to.

Raquim does not need to take a mitigation step in relation to £400,000 of the disposal proceeds, because his investment comprised £400,000 of TRF capital. He can keep this amount in the UK and no tax charge will arise on the remittance of this amount. However, he will need to consider whether to take a mitigation step in relation to the remaining £100,000 of disposal proceeds in order to prevent the undesignated foreign income from being treated as remitted and taxed at the usual tax rates.

Raquim decides to take a mitigation step, and he could just take £100,000 of the disposal proceeds offshore. As a result of Raquim taking a mitigation step, the £400,000 of TRF capital is treated as remitted on 1 March 2028, the date of the potentially chargeable event. The £100,000 of undesignated foreign income has not been treated as remitted. If Raquim brings the £500,000 back to the UK on a future date, the TRF exemptions will prevent any tax charges arising on the remittance of the £400,000 of TRF capital, but the remittance of the £100,000 of foreign income will be taxed at the usual tax rates.

If, instead of taking the £500,000 offshore, Raquim re-invested the full amount on 5 April 2028, this would be treated as a qualifying investment of £100,000 comprising his undesignated foreign income, on which BIR has been claimed, and a non-qualifying investment of £400,000.

If Raquim did not take a mitigation step, the £500,000 would be treated as remitted on 15 April 2028, at the end of the grace period. The TRF exemptions would prevent a tax charge arising on the remittance of the TRF capital, but Raquim would have a tax charge in 2028-29 on the £100,000 remittance of foreign income at the usual tax rates. It would be too late to designate this amount as the TRF period ended on 5 April 2028.