RDRM75100 - Temporary repatriation facility: Mixed funds: Mixed funds and the TRF
Source: gov.uk (2025-04-07)


Overview (#Overview)

TRF capital (#TRF Capital)

Definition of a mixed fund (#Definition of a mixed fund)

Special mixed fund rules (#Special mixed fund rules)

Overview

Once income, capital or gains enter a mixed fund it is usually considered to lose its ‘identity’ within the fund. So, rules are needed to determine what any subsequent remittance from that fund represents.

Untaxed foreign income is treated as being remitted in priority to untaxed foreign gains from the same tax year, which are both treated as remitted in priority to foreign income and gains from that year on which foreign tax has been paid. Amounts of capital of the tax year are taken into account last. Income and capital from a later year are treated as remitted in priority to those of earlier years. See RDRM35210 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm35210) for an overview of mixed funds.

Under the temporary repatriation facility (TRF), amounts of foreign income and gains that are qualifying overseas capital (see RDRM721000 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm72100) onwards) may be designated, and where these amounts are in a mixed fund, whether this is a bank account or an asset, the ordering rules differ.

Amendments have been introduced which allow for amounts that are TRF capital (see below) to be remitted to the UK in priority to all other kinds of income and gains in a mixed fund – see RDRM75200 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75200). New rules have also been introduced to allow TRF capital to be separated out into a special overseas account – see RDRM75310 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75310), so that an individual can avoid using up TRF capital in offshore transfers – see RDRM75400 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75400).

During the TRF period an annualised basis applies to mixed funds that contain or contained TRF capital at any time during the tax year, instead of the usual transaction-by-transaction basis – see RDRM75500. (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75500)

TRF capital

Section 809Q(9) Income Tax Act 2007

The term ‘TRF capital’ is used to mean any amount that is both qualifying overseas capital under paragraph 2 schedule 10 FA 2025, that is, either pre-6 April 2025 foreign income and gains or uncertain amounts (see RDRM72200 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm72200) and RDRM72300 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm72300)) and designated qualifying overseas capital. This means that amounts that are treated as designated overseas capital by paragraph 8(6) schedule 10 FA 2025 but are determined not to be qualifying overseas capital under paragraph 2 are not TRF capital for the purposes of Chapter A1 ITA 2007.

Definition of a mixed fund

Section 809Q(6)(c) Income Tax Act 2007

From 6 April 2025, the definition of a mixed fund includes a fund which contains TRF capital and another kind of income or capital. This means that an account or asset which was not a mixed fund on 5 April 2025 could become a mixed fund on or after 6 April 2025 if there is an amount of TRF capital within it. If an amount is designated, the account or asset will become a mixed fund at the start of the tax year, as this is when a designation for that tax year is treated as taking place.

Example

Ximena is UK resident and a former remittance basis user. On 5 April 2025 she has an overseas bank account which contains £200,000 of foreign dividend income from 2024-25. Ximena’s bank account is not a mixed fund because it contains only one kind of income or capital.

There is no activity on her bank account during the 2025-26 tax year, but anticipating future remittances, Ximena designates £150,000 of the foreign income in her account in her 2025-26 tax return and pays the TRF charge. Ximena’s bank account has become a mixed fund, comprising:
- £150,000 TRF capital
- £50,000 foreign dividend income from 2024-25
If Ximena had instead designated the entire £200,000 in the account, then providing there were no deposits into the account, it would not be a mixed fund because it would only contain TRF capital and no other kind of income or capital.

Special mixed fund rules

Prior to 6 April 2025, former remittance basis users who were able to claim Overseas Workday Relief could nominate one account to act as a ‘special mixed fund’ - see RDRM35810 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm35810).

From 6 April 2025 the special mixed fund rules no longer apply. All existing qualifying accounts ceased to be qualifying accounts on 6 April 2025, because an individual will have no general earnings within section 26(1) ITEPA 2003 for 2025-26 or a later tax year. This is due to section 26(1) requiring that the general earnings relate to a year in which the individual is subject to the remittance basis, and the remittance basis of taxation is not available from 2025-26 onwards.

Therefore, previous qualifying accounts (that contain more than just one type of income or capital from one tax year) are ordinary mixed fund accounts from 6 April 2025 onwards.

The ending of the special mixed fund rules does not prevent the foreign income and gains within previous qualifying accounts from being designated under the TRF, or prevent the annualised basis applying to the account for the TRF period where it contains TRF capital.