RDRM74760 - Temporary repatriation facility: Scope of designation: BIR investments: Investments made with TRF capital
Source: gov.uk (2025-04-14)


During the temporary repatriation facility (TRF) period if any new investments, or reinvestments, are made with TRF capital that was designated before being invested or reinvested, they will be treated as non-qualifying investments for the purposes of the business investment relief (BIR) rules.

This will apply where an individual already has qualifying investments in the same company or group that they make the investment in, whether or not the foreign income and gains that comprise any qualifying investment have been designated.

It means that investments made with TRF capital are not prioritised where there is a disposal (see RDRM74730 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74730)) because TRF capital is only prioritised on disposal if the amount was designated in a tax year after the tax year in which the investment is made.

Where an individual brings an amount of TRF capital to the UK, either by a direct payment to a company or via a transfer to their UK bank account, to make a non-qualifying investment, it will be remitted at the time it is brought to the UK and no tax charge will arise on the remittance.

Example 1

Monika is UK resident and a former remittance basis user. In the 2023-24 tax year Monika acquired shares to the value of £600,000 in a UK company using her foreign gains from 2022-23 and claimed BIR on the investment.

On 6 April 2025, Monika has an overseas bank account containing £900,000 of foreign income from 2023-24. In the 2025-26 tax year she designates all £900,000 of foreign income in her account under the TRF and pays the TRF charge on this amount.

On 30 April 2026 Monika uses £400,000 from her overseas bank account to make a loan to the same UK company in which she subscribed for shares. As the new investment has been made with TRF capital that was designated in an earlier tax year it is a non-qualifying investment in the same company in which she has a qualifying investment.

On 30 April 2027 Monika receives full repayment of the £400,000 loan. As qualifying investments are treated as being disposed of in priority order to non-qualifying investments (see RDRM34535 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm34535)), the disposal of the loan is treated as comprising £400,000 of the foreign gains from 2022-23. The TRF capital is not prioritised on disposal because it was designated in a tax year before the investment was made. Although the investment made with TRF capital is lower priority than any qualifying investments, there will be no further tax charge when it is eventually treated as disposed of.

Monika will need to take a mitigation step in relation to the £400,000 in order to prevent the undesignated foreign gains from being subject to a taxable remittance at the end of the grace period. Alternatively, Monika could designate the £400,000 when completing her Self Assessment tax return for 2027-28 and pay the TRF charge on the £400,000, which means she would not be required to take a mitigation step, and she will benefit from the low TRF rate.

Example 2

Marius is UK resident and a former remittance basis user. In the 2023-24 tax year he made a loan of £350,000 to a UK company, OzzTech Ltd, using his foreign income from 2021-22, and claimed BIR on the investment.

In the same year he made a loan of £200,000 to another UK company, Lokil Ltd, using £200,000 of his foreign gains from 2020-21, and claimed BIR on the investment.

On 30 October 2025 he receives a partial repayment of the loan to OzzTech Ltd of £125,000, which is a part disposal. On 5 November 2025 he reinvests the £125,000 in Lokil Ltd by subscribing for share capital.

Although he took a mitigation step and reinvested the £125,000, Marius decides to take advantage of the low TRF rate in 2025-26 and designates the full £350,000 that comprised the qualifying investment he made in OzzTech Ltd in 2023-24, paying the TRF charge on this amount. He does not designate any of the foreign gains he invested in Lokil Ltd.

Because designations are treated as having taken place at the start of the tax year, when Marius received a partial repayment of his loan from OzzTech Ltd on 30 October 2025, the £125,000 had been TRF capital since 6 April 2025 and was treated as remitted on 30 October 2025. Therefore, the reinvestment he made in Lokil Ltd on 5 November is a non-qualifying investment.

On 30 November 2026 Marius disposes of part of his shareholding in Lokil Ltd, the value of the part disposal being £50,000. As qualifying investments are treated as being disposed of in priority order to non-qualifying investments, the disposal of the shares is treated as comprising £50,000 of the foreign gains from 2020-21 that comprised the loan to Lokil Ltd. The TRF capital is not prioritised on disposal because it was not designated in a tax year before the investment was made (it was designated in the same year). Although the investment made with TRF capital is lower priority than any qualifying investments, there will be no further tax charge when it is eventually treated as disposed of.

Marius will need to take a mitigation step in relation to the £50,000 in order to prevent the undesignated foreign gains from being subject to a taxable remittance at the end of the grace period. Alternatively, Marius could designate the £50,000 when completing his Self Assessment tax return for 2026-27 and pay the TRF charge on the £50,000, which means he would not be required to take a mitigation step and he will benefit from the low TRF rate.