The UK’s proposals for non-doms and their structures (as of 10 March 2025)

Budget 2024 – Non-dom

Budget 2024 – Non-dom proposals• It will completely exempt most forms of foreignincome and gains from UK income tax andcapital gains tax and will allow them to bebrought into and used in the UK without anyfurther taxation.Rebasing reliefThere will be two main transitional rules in relationto the income tax and capital gains aspects of thenew regime for individuals.The first of these is a form of rebasing relief forindividuals who have claimed the remittance basisin the past. Where available, this can be used torebase personally held foreign assets to theirmarket value as of 5 April 2017.The main criteria are as follows:• The individual must not have been UKdomiciled or deemed domiciled prior to 6 April2025;• The individual must have claimed theremittance basis for at least one tax yearbetween 2017/18 and 2024/25 (inclusive);• The asset must have been held as of 5 April2017 and be disposed of on or after 6 April2025; and• The asset must have been situated outside ofthe UK between 6 March 2024 and 5 April2025.The existing rebasing relief for those who becamedeemed domiciled with effect from 6 April 2017will also continue to be available, albeit withslightly changed criteria.The Temporary RepatriationFacility (the “TRF”)Overview of the TRFThe second transitional rule is the TemporaryRepatriation Facility, referred to as the “TRF”.The TRF will be available in three tax years(2025/26, 2026/27 and 2027/28) and can, at itssimplest, be thought of as a regime which:• allows foreign income and gains which havearisen under the existing remittance basisprior to 6 April 2025 to be taxed at a flat rateof either 12% or 15% (depending on the year)and be remitted into the UK with no further taxcharge; and• allows trust distributions made in those threetax years to also be taxed at either 12% or15% (depending on the year) to the extentthey “match” to income and/or gains whicharose in the trust structure prior to 6 April2025.In each case the flat rate is known as the “TRFCharge” and will vary by tax year as follows:Tax year2025/26 12%2026/27 12%2027/28 15%TRF ChargeWhilst there are similarities in how the TRFapplies in each of the two use cases describedabove, there are also sufficient differences that itis arguably better thought of as two sub-regimes.To avoid confusion this article uses the labels:• The “Personal TRF” when referring to theTRF used to reduce the tax rate on foreignincome and gains which have arisen underthe existing remittance basis regime; and• The “Trust TRF” when referring to the TRFused to reduce the tax rate on distributionsmade from trusts in the tax years 2025/26 –2027/28.This will be available to anyone who is UK taxresident and has been subject to the remittancebasis in any tax year up to and including 2024/25(so including those who are already deemeddomiciled). Note that a person may have been“subject to” the remittance basis without havingmade a claim for it (and in fact without even beingaware of it, particularly if they were a child at thetime).5

Budget 2024 – Non-dom proposalsThe “Personal TRF” in more detailCriteria to be availableWhat it can apply toHow to claimEffect of a claimThe individual must have been subject to the remittance basis prior to 6 April 2025.They must also have at least some unremitted foreign income and gains as of 5 April2025.The Personal TRF can be used on two key categories of foreign income and gainswhich arose prior to 6 April 2025 whilst the individual was a remittance basis user:• Foreign income and gains which are as yet unremitted in the tax year forwhich the designation is being made; and• Foreign income and gains have been remitted in the tax year for which thedesignation is being made.It can apply to foreign income and gains in any form (so both cash and in-specieassets).A claim must be made to “designate” the relevant foreign income and gains as “TRFCapital” in a tax return.The deadline is 31 January two years after the end of the relevant tax year (so adesignation for 2025/26 must be made by 31 Jan 2028).The designated foreign income and gains are subject to the “TRF Charge” of 12%(2025/26 and 2026/27) or 15% (2027/28).The TRF Charge replaces the normal income tax/capital gains tax charge which wouldarise on a remittance of the designated funds so there is then no further tax to pay.The charge is effectively added to the individual’s income tax liability and so is payableby 31 January after the end of the relevant tax year (e.g. the TRF Charge for 2025/26will be due by 31 Jan 2027).If a designation is made after that deadline (noting that the time limit for designationis 31 January two years after the end of the relevant tax year) then there will also beinterest to pay on the TRF Charge.One downside of using the Personal TRF is that the individual loses the ability to claimforeign tax credits on the designated amount.The “Personal TRF”, mixed funds and TRF Capital AccountsThose familiar with the remittance basis more generally will also be familiar with the concept of a “mixedfund”.Mixed funds are a highly complex topic but for the purposes of this article they can be thought of as bankaccounts or in-specie assets which comprise some mix of unremitted foreign income or gains and/or “cleancapital”. The key point is that if the whole of the mixed fund was remitted to the UK, different elements wouldbe taxed in different ways. If only part of a mixed fund is transferred/remitted, there are strict ordering ruleswhich determine which element(s) is/are deemed to come out first for remittance purposes.Individuals will often endeavour to avoid remittances from mixed funds because (a) such a remittance willalmost certainly result in some UK tax and (b) when calculating that tax they may not know what they areremitting and so may have to assume a worst case scenario by paying income tax rates on the entireremittance.The TRF rules can help individuals access mixed funds:• If the whole of a mixed fund is designated using the Personal TRF then clearly it can all be brought intothe UK without further tax.• If only part of a mixed fund is designated then when any amount is remitted from the mixed fund thedesignated part will be deemed to be remitted first.The Government is clearly conscious that those using the TRF may not be able, or wish, to immediatelyremit what they designate. For example, the individual may wish to keep the designated funds outside of theUK to reduce their inheritance tax exposure. Simply leaving the designated TRF Capital (i.e. the foreignincome and gains designated using the TRF) may not be an attractive option because over time furthertransfers into and out of the account could dilute the TRF Capital or at least make tracking it difficult.A new concept called a “TRF Capital Account” is being introduced to allow individuals to collate their TRFCapital without remitting it. There is no obligation to use a TRF Capital Account but they are likely to be6