RDRM73400 - Temporary repatriation facility: Designating qualifying overseas capital: TRF charge
Overview
The temporary repatriation facility (TRF) charge is a charge on an amount of designated qualifying overseas capital.
See RDRM72100 onwards for a definition of ‘qualifying overseas capital’ and RDRM73300 onwards for guidance on the designation process.
The TRF charge is a charge on capital. It is not a tax on income or capital gains. While the mechanism for collection is through HMRC’s Income Tax system, this does not affect the character of the charge.
Where a Double Taxation Convention applies to taxes on income and capital gains, but not to taxes on capital, the TRF charge will not be within the scope of the Convention.
As the TRF charge is not a payment of Income Tax or Capital Gains Tax, where a taxpayer has made Gift Aid donations in a tax year, the TRF charge cannot be used to frank Gift Aid claimed by the charity receiving the donation. Donors who have not been charged sufficient tax to cover the Income Tax deducted from their Gift Aid donations are responsible for paying any difference.
Payment of the TRF charge will also not impact an individual’s payments on account due for the following tax year.
Otherwise, legislation that applies generally to Income Tax applies to the TRF charge, because amounts of TRF charge are charged in the same way as if they were amounts of Income Tax, which includes:
- completion of tax returns
- record keeping
- rights of appeal
- penalties and interest on unpaid tax
Amount of charge
The amount of the TRF charge is:
- 12% of the amount of qualifying overseas capital designated in a return for the tax year 2025-26 or 2026-27
- 15% of the amount of qualifying overseas capital designated in a return for the tax year 2027-28
Payment of charge
If an individual decides to pay the TRF charge using pre-6 April 2025 foreign income or gains from an overseas bank account, they will need to ensure that the amount used to the pay the charge has been designated, otherwise the transfer to the UK to make the payment will be an ordinary remittance, taxed at the usual tax rates.
Former remittance basis users who paid the remittance basis charge (RBC) may be familiar with an exemption at section 809V ITA 2007, which treats money brought to the UK to pay the remittance basis charge as not remitted if direct payment was made to HMRC. There is no exemption in the TRF legislation that would prevent money paid to HMRC to pay the TRF charge being remitted and taxed at the usual tax rates.
Where a former
remittance basis user has paid the RBC, this will have no impact on their
designation under the TRF. RBCs previously paid cannot be offset against an
amount of TRF charge.
Example
Nida is a UK resident and former remittance basis user. She has a property in Australia that she purchased with £50,000 of foreign gains from 2021-22. She plans to sell it in a few years’ time and remit the proceeds to the UK. In order to take advantage of the low TRF rate she designates the £50,000 in her 2025-26 tax return.
The amount of the TRF charge due and payable is £6,000 (12% of £50,000). On 31 January 2027 she pays the £6,000 directly to HMRC from an overseas bank account which contains £30,000 of foreign income from 2022-23. The payment of £6,000 would be an ordinary remittance of foreign income taxed at the usual Income Tax rate for 2026-27.
However, Nida decides instead to designate all the foreign income from 2022-23 in her overseas bank account in her 2026-27 tax return, so that she can pay her 2025-26 and 2026-27 TRF charges from it without any Income Tax charges arising when she makes payments to HMRC. When Nida designates the foreign income in 2026-27 a TRF charge of £3,600 (12% of £30,000) will be due. If she pays both TRF charges from her overseas bank account she will have paid a total of £9,600 to HMRC, and the remaining £20,400 can be remitted without a further tax charge. The proceeds from her Australian property that derive from the foreign gains from 2021-22 can also be remitted without a further tax charge. Alternatively, Nida could pay any TRF charge using clean capital.