The UK’s proposals for non-doms and their structures

The UK’s new tax

The UK’s new tax regime for internationally connected individuals and their structures (as of 25 June 2025)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 either have to pay for an analysis to be undertaken or assume a worst case scenarioby paying income tax rates on the entire remittance.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” has been 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 beattractive for individuals who are designating part of one or more mixed funds and want to keep thoseamounts outside of the UK.Very broadly, a TRF Capital Account is an ordinary bank account (which must not have more than £10 in it tobegin with) which the individual nominates to serve as a TRF Capital Account. That nomination is maderetrospectively in a tax return.A transfer from (a) a mixed fund which contains TRF Capital into (b) a TRF Capital Account will alwaystransfer TRF Capital first to the extent possible. Transfers of anything other than TRF Capital will cause theaccount to lose its special status unless remedied within 30 days (and there are limits on how many errorscan be remedied this way).TRF Capital Accounts cannot be used to make investments (they must be ordinary cash accounts) so weexpect them to be used simply to collate TRF Capital which is then transferred out again, perhaps into aninvestment account.8

The UK’s new tax regime for internationally connected individuals and their structures (as of 25 June 2025)The “Trust 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 receive a capital payment (essentially any form of benefit other thanan income distribution) from a trust between 6 April 2025 and 5 April 2028.To the extent that a capital payment from a non-UK resident trust (or a migrated trust)“matches” to income and gains within the trust, those income and/or gains are(broadly speaking) attributed to the beneficiary who is then subject to income tax orcapital gains tax on them as appropriate. The applicable tax rates can be as high as45%.The Trust TRF can be used to reduce the tax rate on the amount of those matchedincome and gains to the extent that they arose within the structure prior to 6 April2025.Where both pre and post 6 April 2025 income and/or gains and are available to match,the new rules should generally result in the pre-6 April 2025 income and gainsmatching first. If, despite this, any part of the capital payment still matches to incomeor gains arising on or after 6 April 2025 that part cannot be designated (and so will besubject to income tax or capital gains tax at the usual rates).The Trust TRF cannot be used in relation to income distributions.A claim must be made to “designate” the relevant amount.The deadline is 31 January two years after the end of the relevant tax year (so adesignation for a capital payment made in 2025/26 must be made by 31 Jan 2028).The designated amount of matched 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 the matched income or gains. Note that IHT will need to be consideredseparately.Again, the TRF Charge is effectively added to the individual’s income tax liability andso is payable by 31 January after the end of the relevant tax year (so the TRF Chargefor 2025/26 will be due by 31 Jan 2027).This could be a very valuable relief. For example, if a £150,000 capital distribution is made to a beneficiaryand would match to £100,000 of income and £50,000 of gains then the beneficiary could easily be looking ata tax charge of £57,000 under the existing rules (45% on the £100,000 and 24% on the £50,000). Variouselements of the matching rules could even result in a greater charge than that.In contrast, if the £100,000 of income and £50,000 of gains all arose pre-6 April 2025 then the Trust TRFmight simply tax the whole £150,000 at a rate of 12% which would be only £18,000.Changes to the remittance basis in relation to pre-6 April 2025 foreign income and gainsAlthough the remittance basis has been abolished for income and gains arising on or after 6 April 2025 itremains relevant to foreign income and gains which arose under the remittance basis regime. This has anumber of practical implications, including that those who have unremitted foreign income and gains will beincentivised to maintain existing segregated account structures (unless they want to convert it into cleancapital using the TRF).Somewhat surprisingly, the Finance Act 2025 also made changes to what constitutes a “remittance” ofexisting foreign income and gains.Very broadly, foreign income and gains were only be remitted under the previous rules if either:• They were brought into, or used in, the UK; or• They were used to pay for a service which is provided in the UK.9