RDRM72200 - Temporary repatriation facility: Qualifying overseas capital: Pre-6 April 2025 foreign income and gains
Source: gov.uk (2025-04-14)


Paragraph 2(2) and (5) Schedule 10 Finance Act 2025

An amount of income or gains which arose in a year in which the individual was subject to the remittance basis will be qualifying overseas capital for the purposes of the temporary repatriation facility (TRF) if it has never been remitted or it is remitted during the TRF period, and if remitted the individual would be chargeable to Income Tax on income, or a gain is treated as accruing, under one of the following provisions:
- section 832 ITTOIA 2005 - income charged on the remittance basis
- paragraph 1(2) schedule 1 TCGA 1992 - gains charged on the remittance basis
- sections 22 and 26 ITEPA 2003 - chargeable overseas earnings
- section 41F ITEPA 2003 - foreign securities income
- sections 554Z9 and 554Z10 ITEPA 2003 - foreign employment income provided through third parties
This includes amounts that otherwise would be taxable under those provisions but for being treated as not remitted as a result of being exempt property (see RDRM74400 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74400)) (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74400) or as a result of a claim for business investment relief (see RDRM74710 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74710)).

An individual may also have amounts overseas where they are uncertain as to the source of the funds. These amounts can also meet the definition of qualifying overseas capital – see RDRM72300 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm72300). Amounts that are qualifying overseas capital under the definition at paragraph 2(2) must not have been remitted before or during the tax year of designation.

Amounts that are qualifying overseas capital under the definition at paragraph 2(5) are amounts that have been remitted in the year of designation, so there is no requirement under subparagraph (5) for amounts to have never been remitted previously.

If an individual wants to designate an amount that they remit to the UK during the TRF period (that has not already been designated in an earlier year), it must be designated in their Self Assessment tax return for the same tax year as the remittance, if the individual wishes to benefit from the low TRF rate. An individual could not, for example, remit an amount in 2025-26 then designate it in their 2026-27 tax return. See RDRM73100 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm73100) onwards for the designation process and time limits.

Whether amounts are qualifying overseas capital under paragraph 2(2) or (5), once the designation election has been made and the TRF charge has been paid, no further tax charges will arise on the remittance of any of these amounts in the year of designation or a future tax year.

Unremittable income and gains, on which the charge to tax has been deferred due to an individual making a claim under section 842 ITTOIA 2005 or section 279 TCGA 1992, are not qualifying overseas capital.

Example 1

Augusta is UK resident and a former remittance basis user. On 6 April 2025 she has an overseas bank account containing £300,000 of foreign gains from the sale of 2 overseas properties in 2022-23, when she was subject to the remittance basis.

Augusta has never previously remitted any of these gains and doesn’t make any remittances from her account in 2025-26. Anticipating remittances in future, Augusta wants to designate the gains in her 2025-26 tax return.

The foreign gains meet the definition of qualifying overseas capital under paragraph 2(2) because they arose before 6 April 2025, they have not been remitted by the end of the 2025-26 tax year nor previously, and if Augusta remitted them, they would be treated as accruing in the tax year of remittance under paragraph 1(2) schedule 1 TCGA 1992.

Therefore, Augusta can designate the gains in her 2025-26 tax return and when she remits them, whether this is during or after the TRF period, there will be no further tax charge on remittance.

Example 2

Darius is UK resident and a former remittance basis user. He has foreign dividend income of £40,000 which arose in 2024-25 when he was subject to the remittance basis. Darius used these funds to purchase a painting in France which has remained in his apartment in Paris.

If Darius were to bring the painting to the UK this would result in the remittance of the £40,000 of foreign income from which the painting derives. Darius has the option to designate up to £40,000 in any one of the 2025-26, 2026-27, or 2027-28 tax years.

Darius has not yet designated any of the £40,000. On 31 March 2027 Darius brings the painting to the UK to hang in his London home. The foreign income meets the definition of qualifying overseas capital under paragraph 2(5) because it arose before 6 April 2025, has been remitted during the TRF period and is chargeable to Income Tax on remittance under section 832 ITTOIA 2005.

However, because it was remitted in 2026-27, Darius must designate the £40,000 in his 2026-27 tax return if he wants to take advantage of the low tax rate; he cannot wait until 2027-28. If Darius does not designate some or all of the £40,000, the undesignated amount will be taxable as an ordinary remittance at the usual tax rate in 2026-27.