The abolition of the non-dom tax regime – Temporary Repatriation (TRF) and Rebasing

The previous Conservative Government announced the abolition of the non-dom regime in the 2024 Spring Budget. The changes were confirmed, and further details were announced (accompanied by a technical note released on the same day), by the new Labour Party Chancellor, Rachel Reeves at the Autumn Budget. While the legislation remains in draft form and subject to change, we discuss the headline changes here.

The previously announced Temporary Repatriation Facility (TRF) was confirmed and extended by a further year. The TRF is intended to encourage former remittance basis users to remit their previously untaxed Foreign Income and Gains (FIG) to the UK at a reduced rate of tax. This will be 12% for 2025/26 and 2026/27 and 15% for 2027/28.

While the TRF will be very helpful there will be complexities to consider, and it will be important to take advice.

Former remittance basis users will be able to designate their FIG without the need to remit the funds to the UK immediately. This will be helpful, for example, if FIG are wrapped up in a non-liquid asset (e.g. property, vehicles and art).

Those making an election to designate FIG will need to include the election on their tax return. The deadline for making the election will be the first anniversary of 31 January following the filing deadline.

Unlike with the Remittance Basis Charge, it will not be possible to pay the TRF to HMRC’s overseas account using previously untaxed FIG. As such it is important that the TRF tax charge is paid with designated amounts (on which tax is being paid) or clean capital. Something to be mindful of if designated amounts are non-liquid assets.

It is also useful to note that the TRF is non-refundable, so while the rate is beneficial, it will be necessary for those not intending to stay in the UK for the longer term to consider their plans and financial requirements so that they do not inadvertently designate and pay tax on funds that they will not need in the UK.

Once the designation has been made, a future remittance will not need to be declared, but it will be important to keep records in case of a HMRC enquiry.

Helpfully, the mixed fund ordering rules will be amended so that the amounts designated will be treated as remitted in priority to other amounts. Funds that have been transferred to a designated bank account are effectively treated as remitted to the UK. In addition, HMRC have confirmed that a more pragmatic annualised approach can be taken to bank account analysis for the TRF period.

The rules relating to Business Investment Relief (BIR) are also being modified. It will now be possible to designate FIG which have been invested in qualifying BIR investments so that when they are sold (or another chargeable event occurs) there is no need to take the proceeds offshore, as is normally required. It will continue to be a requirement for non-designated amounts to be taken offshore within the normal BIR time limits or reinvested in other BIR investments. However, it will no longer be possible to make BIR investments after 5 April 2028 when the TRF period ends.

Rebasing

For disposals after 5 April 2025, former remittance basis users will be able to rebase a personally held foreign asset to its market value at 5 April 2017.

There are various conditions including:

• The individual has not been UK domiciled or deemed domiciled before 2025/26
• They must have made a remittance basis claim for any one of the tax years 2017/18 to 2024/25
• They must have held the asset on 5 April 2017 and dispose of it after 5 April 2025
• The asset must have been situated outside the UK from 6 March 2024 to 5 April 2025

There is already a rebasing facility for taxpayers who became deemed domiciled under the previous reforms to the taxation of non-domiciles in 2017/18 and this remains available provided they have remained non-domiciled under general law up to and including the 2024/25 tax year.

It should be noted that the rebasing applies on an asset-by-asset basis and it is possible to elect out of the rebasing if it is not appropriate.

Would you like to know more

If you would like to discuss the impact of these changes, please get in touch with your usual Blick Rothenberg contact, or one of the team using the form below.

You can find out more about the non-dom changes on our dedicated page.