Remittance Basis and Domicile Manual

RDRM35410 - Remittance Basis: Amounts Remitted: Offshore Transfers: Offshore transfers - composition of a mixed fund

Broadly, an ‘offshore transfer’ is a term used to describe any transfer from a mixed fund that does not require the ordering and identification rules in section 809Q ITA 2007 to be applied to it.

This will often be because no money or other property is brought to the UK, so Condition A in section 809L ITA 2007 is not met, for instance, when funds are moved from an account which is a mixed fund to another offshore account. Another example might be where money from a mixed fund is spent outside the UK without there being any advantage or benefit in the UK.

An ‘offshore transfer’ takes place if an amount identified as forming part of a mixed fund is moved, spent or otherwise transferred in such a way that, at the end of the relevant tax year, it is not, or on the basis of the best estimate that can be made at the time will not be, regarded as remitted to the UK under Conditions A and B of section 809L or transferred under section 809RZA ITA 2007 (section 809R(5) and (6) ITA 2007). If a remittance under Conditions A and B does happen in the year, so that the ‘offshore transfer’ rules cannot be applied then the rules at section 809Q apply instead.

From 6 April 2025, where foreign income and gains have been designated under the temporary repatriation facility (see RDRM71000), it is possible for a mixed fund to contain ‘TRF capital’ (see RDRM75100). There is an exception to the offshore transfer rules where an individual transfers an amount of TRF capital to a TRF capital account. Although this is strictly an offshore transfer, there are special rules at sections 809RZA to 809RZD ITA 2007 which apply to this type of transfer – see RDRM75310. If a transfer under section 809RZA happens in the year, then the rules within that section apply instead.

The phrase ‘offshore transfer’ should be read with caution; for example, the application of a mixed fund of income or gains outside of the UK as consideration for a service provided in the UK (refer to RDRM33100: Conditions A and B - overview) or in respect of a relevant debt is not an ‘offshore transfer’ within the meaning of section 809R. That is because consideration for a service or a payment that is made in respect of a relevant debt are both taxable remittances within Conditions A and B and are dealt with under section 809Q.

Where a transfer is made from a mixed fund that is partly a ‘remittance’ transfer to which section 809Q applies and is also in part an offshore transfer to which section 809R(4) applies, the rules in section 809Q are applied first (section 809R(8)).

Where more than one transfer takes place the ordering rules in section 809Q are applied successively. This means that those income, gains or capital (including TRF capital) that are identified as having been used to make the first transfer are excluded from the second and subsequent transfers (section 809R(9)).

Any foreign income and gains used by a taxpayer to make an offshore transfer from a mixed fund are taken into account when determining the extent to which a remittance from a mixed fund consists of income, chargeable gains or capital. To decide this, it is necessary first to ascertain the composition of a mixed fund and the amounts and types of income, gains or capital contained therein.