# TRF Designation Mechanics

> TRF designation after Finance Act 2026: rates by designation year, eligibility, the double designation requirement, mixed funds and correcting errors.

Author: Maria Plotnikova — Lawyer, Family Office (https://wiki.private.law/en/authors/plotnikova)
Last modified: 2026-09-09T00:00:00.000Z
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Cite as: TRF Designation Mechanics. wiki.private.law. https://wiki.private.law/en/uk-trf-designation-mechanics. Version a108346af8e2d2a2464558f92e9aea1b6d2ca4321d4f50506323c142eca0547d.
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## Concept

The Temporary Repatriation Facility turns on a single act: designating an amount of qualifying overseas capital in a tax return. Designation fixes the rate of the charge and clears the amount of tax on any later remittance to the United Kingdom; the money itself may arrive in a later year or never arrive at all. The TRF charge is a charge on capital. It is collected through the income tax system but is neither income tax nor capital gains tax (Schedule 10 Finance Act 2025, paragraphs 1(1)–(2) and 9(2); HMRC [RDRM73400](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm73400)).

The window covers three designation years — 2025-26, 2026-27 and 2027-28 — and closes on 5 April 2028. [Finance Act 2026](https://www.legislation.gov.uk/ukpga/2026/11/schedule/3) (2026 c. 11, Royal Assent 18 March 2026) rewrote the mechanics in Schedule 3, Part 2, and paragraph 18(1) gives those amendments retrospective effect: Schedule 10 Finance Act 2025 is deemed always to have had effect as amended. Calculations prepared before March 2026 for a 2025-26 return fall under the new rules retrospectively, not from a future year.

> ⚙️ Three dates in this structure run on different clocks. The rate follows the tax year of the return in which designation is made. The deadline for the election itself runs a further twelve months beyond the ordinary filing date and, for the last year of the window, extends to 31 January 2030. The date money enters the United Kingdom is tied to neither. Conflating the three accounts for most of the value lost in execution.

## The rate follows the designation year

Under paragraph 1(8) of Schedule 10 the charge is set by the tax year of the return in which the amount is designated. The year in which funds are actually remitted has no effect on the rate and is not required at all: a designated amount stays clear indefinitely.

| Designation year | TRF charge | Election deadline |
| --- | --- | --- |
| 2025-26 | 12% | 31 January 2028 |
| 2026-27 | 12% | 31 January 2029 |
| 2027-28 | 15% | 31 January 2030 |

The election deadline is twelve months from the ordinary filing date, that is the anniversary of the 31 January following the end of the tax year (paragraph 8(1); HMRC [RDRM73320](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm73320)). Hence a common planning error: the closing of the window on 5 April 2028 and the final filing date of 31 January 2030 are different dates, and the later one rescues nobody where the amount belonged in an earlier year's return.

A designation is treated as made from the beginning of the tax year to which the return relates (paragraph 8(7)), so the exchange rate is the rate on 6 April of that year rather than the rate on the filing date or the remittance date ([RDRM73310](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm73310)).

Not every amount carries a free choice of year. Capital within paragraph 2(2) — arising before 6 April 2025 and unremitted — may be designated in any of the three years. Capital within paragraph 2(5), remitted during one of those years, may be designated only in the return for the year of remittance (paragraph 2(6)); the same restriction applies to deemed income under paragraphs 6(3) and 7(3). For those amounts the rate is set by the event rather than by the decision.

## Eligibility

Three conditions must each be satisfied (paragraph 1; [RDRM73200](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm73200)). Designation is made only by a designation election in a Self Assessment return under s 8 TMA 1970; no other route exists, and an election made by letter or in correspondence with an officer does not count. For the tax year of the return the individual must be UK resident for income tax and capital gains tax purposes under the [Statutory Residence Test](https://wiki.private.law/en/uk-tax-residence); a non-resident year yields no designation. And the facility is open only to an individual who was subject to the remittance basis for at least one tax year before 2025-26 — under ss 809B, 809D or 809E ITA 2007 for years from 2008-09, and for earlier years on the basis that income or gains were in fact taxed on that basis.

The TRF carries no ten-year condition of any kind, which is worth separating from neighbouring provisions of the same reform where the figure ten appears twice with different meanings. Ten consecutive tax years of non-UK residence is an eligibility condition for the [FIG regime](https://wiki.private.law/en/uk-fig-regime) and has nothing to do with the TRF. The age condition added by the same Finance Act 2026 to the definition of a qualifying new resident (s 845B(1)(d) ITTOIA 2005) measures the individual's own age: at the commencement of the tax year the individual must be at least 10 years old. The paragraph sets no period of non-residence; it counts the years the person has lived. The practical effect is that the FIG regime is closed to children under ten. Unlike neighbouring paragraphs of the same Schedule, this paragraph carries no commencement provision of its own, so its temporal reach should be checked against HMRC guidance.

## What Finance Act 2026 rewrote

Paragraphs 9 to 17 of Schedule 3 amend Schedule 10 Finance Act 2025, and paragraph 18(1) makes them retrospective in the words "has effect, and is to be deemed always to have had effect". Paragraph 18(2) applies the same retrospective effect to the amendment of s 809Q(9) ITA 2007.

### Remittance provision and the two-designation requirement

New paragraph 8(2B) introduces the term "remittance provision" and defines it exhaustively as paragraphs 2(2), 2(5) and 6(1)(b) of Schedule 10. Designating on that basis and designating otherwise are now distinct acts, and under new paragraph 8(2)(aa) the return must state, for each amount designated, whether or not it is designated on that basis.

The reason for the split is that one sum of money can be qualifying overseas capital on two separate grounds at once: as pre-6 April 2025 income or gains taxable on remittance, and as a trust capital payment matched with trust gains under paragraph 3 or 5. Paragraph 8(2C) provides that a designation made on the remittance-provision basis is not to be regarded as a designation under paragraph 3 or 5 for the purposes of the reliefs in paragraphs 10(7) and 13. Paragraph 8(2D) draws the consequence: two designations of the same amount are required to secure the benefit of all the available reliefs — one on the remittance-provision basis and one not on that basis.

The cost of that doubling is direct, because the charge attaches to each designation. HMRC works the arithmetic through its own example at [RDRM73600](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm73600). A painting bought with £10m of foreign dividend income and settled into an offshore trust is distributed to the beneficiary offshore and matched with £1m of trust gains. Designating only the £1m under paragraph 3 removes capital gains tax on the deemed gain, but bringing the painting into the United Kingdom remains a £10m taxable remittance. Designating only the £10m under paragraph 2 clears the remittance but does not stop the £1m gain arising. Closing both sides requires designations totalling £11m and a TRF charge of £1,320,000.

One internal inconsistency in the Act is worth knowing when reading the provision. Paragraph 8(2D) lists four reliefs — 10(1), 10(7), 12(1) and 13 — but [s 52](https://www.legislation.gov.uk/ukpga/2026/11/section/52) of the same Finance Act 2026 omitted paragraphs 10(7) and 10(8) of Schedule 10, together with paragraph 4 (offshore income gains cases), treated as having come into force on 6 April 2025 and with effect for 2025-26 and subsequent tax years. The live set of reliefs for which two designations are needed is therefore paragraphs 10(1), 12(1) and 13. Transitional consequences of that repeal for offshore income gains are preserved separately by s 53.

### Section 732 deemed income brought within the perimeter

Paragraph 9 inserts new sub-paragraph (1A) into paragraph 7 of Schedule 10 and brings income deemed to arise under s 732 ITA 2007 — the benefits charge in the transfer of assets abroad code — within the facility. The matching machinery in paragraphs 3 and 5 applies to such income with substitutions: the benefit by reference to which the income is treated as arising stands in place of the capital payment, and those paragraphs are applied on a second pass, after they have been applied to capital payments proper. For family structures holding offshore trusts this opens a further layer to designation that previously fell outside the window.

### Valuing the capital designated

New paragraph 8(2A) fixes the value of qualifying overseas capital at its value when it first arose to the individual. The rule applies to capital within paragraphs 2(2), 2(5) and 6(1)(b). The practical effect is set out at [RDRM74300](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm74300): a non-liquid asset can be designated without being disposed of, and what is designated is the amount of pre-6 April 2025 foreign income and gains from which the asset derives, irrespective of the asset's current value. No valuation is required; where it is not known what was used to acquire or enhance the asset, the costs of acquisition and enhancement are used. Rebasing an asset to its 5 April 2017 value for capital gains tax purposes does not affect the amount designated.

### Foreign tax paid out of other funds

The general rule in paragraph 8(3) allows only the net amount to be designated after deducting relevant foreign tax paid or payable. New paragraph 8(4A) disapplies that rule to the extent the foreign tax has been, or will be, paid out of funds other than the related qualifying overseas capital. The logic is symmetrical: where the tax comes out of the same pool, the pool is already reduced; where it comes from elsewhere, the capital is intact and there is nothing to deduct. For the client this means that paying foreign tax from clean funds increases the base of the charge, so the source of the tax payment belongs in the same calculation as the designation.

### Credit for the charge against assessments for earlier years

New paragraphs 8(6A) to (6C) close an old asymmetry. The charge is not repayable under paragraph 8(6) even where the amount designated turns out not to have been qualifying overseas capital, and before Finance Act 2026 such a client could pay twice. Now, where on or after 6 April 2025 an officer of Revenue and Customs, in relation to 2024-25 or an earlier tax year, amends the individual's self-assessment during an enquiry under s 9A TMA 1970, issues a partial or final closure notice under s 28A, or makes a discovery assessment under s 29, and the effect is that income tax or capital gains tax is charged on the same amount, the tax due and payable under s 59B TMA 1970 is reduced by the TRF charge paid, but not below nil.

The other side of that credit is unforgiving. Under paragraph 8(6C) the designation may then neither be altered nor revoked, even where the return could otherwise still be amended. The charge becomes a payment on account of the assessment and is not recoverable. Other parts of the return, and other designations within it, remain open to amendment. Where earlier periods are still open, sequencing disclosure and designation is best planned in advance — the general machinery is set out in [HMRC enquiries and cleanup](https://wiki.private.law/en/uk-hmrc-enquiries-cleanup).

### Derived amounts and the inheritance tax boundary

New paragraph 13A addresses the same income being represented in more than one place at once. Where the remittance of amount A would be taxable by reference to the same income or gains as a designated amount B, amount A is treated, up to the level of amount B, as designated qualifying overseas capital and as designated on the remittance-provision basis. The charge on a given tranche of income is therefore paid once, even where that income is traceable into several assets. The limits are twofold: the rule operates only so far as amount A relates to the same reference income or gains, and only up to the amount of B; any excess needs its own designation.

New paragraph 13B separates the effects of Schedule 10 from the inheritance tax code. Parts 1 and 2 of the Schedule are ignored for the purposes of s 65(5)(b) IHTA 1984, so TRF relief does not of itself prevent an amount being regarded as a person's income for income tax purposes under that section. One exception is carved out: where a trust capital payment gives rise to designated qualifying overseas capital, so much of the deemed disposal under s 71 TCGA 1992 as reflects that capital is treated as a chargeable transfer, but for the purposes of s 260(2)(a) TCGA 1992 alone, that is for holdover relief.

### The widened definition of TRF capital

Paragraph 17 omits sub-paragraph (a) of s 809Q(9) ITA 2007. Previously "TRF capital", for mixed fund purposes, meant only designated capital that was qualifying overseas capital as a result of paragraph 2 of Schedule 10. It now means any designated qualifying overseas capital, including matched capital payments under paragraphs 3 and 5 and deemed income under paragraphs 6 and 7. The amendment is retrospective under paragraph 18(2), and it materially widens the class of amounts that take priority in the remittance ordering rules.

## Mixed funds and tracing

Designation rewrites the arithmetic of a mixed account. A new Step A1 is inserted in s 809Q(3) ITA 2007 ahead of the ordinary steps: TRF capital comes out of the fund before anything else. The usual last in, first out principle, under which income and capital of a later year are remitted ahead of an earlier year, does not apply to TRF capital, which takes priority regardless of the year of the underlying income and regardless of when it was designated ([RDRM75200](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75200)).

That priority carries a cost easily missed on a partial designation. An offshore transfer from a mixed fund is ordinarily treated as consisting of a proportion of each kind of content, so designated capital is consumed by offshore spending as well and can be exhausted before it is needed in the United Kingdom ([RDRM75100](https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm75100)). The answer is a segregated account: under s 809RZB ITA 2007 an individual may, by notice to the Commissioners, nominate a bank account as a TRF capital account, specifying the qualifying date — the first date on which more than £10 of TRF capital is paid into the account at a time when its credit balance was £10 or less. Notice must be given no later than 31 January in the tax year following the tax year in which the qualifying date falls, or by such later date as the Commissioners allow. A transfer into such an account within the TRF capital held in the fund is treated as a transfer of TRF capital (s 809RZA), and interest paid into the account on TRF capital held there is itself treated as TRF capital.

The status of the account is fragile. Under s 809RZC any payment in that is not TRF capital is a breach of the TRF deposit rule. A breach can be remedied by transferring the required amount out within 30 days by a single one-off transfer that does not itself result in a remittance to the United Kingdom. But once two days of breach have occurred in a tax year, no later breach in that year can be remedied and the account loses its status.

A further layer is the temporary annualised basis. For 2025-26, 2026-27 and 2027-28, where a mixed fund contains TRF capital at any time in the year, s 809RZZA determines the composition of each transfer through three deemed transfers at the end of the year — into a TRF capital account, condition A transfers, and offshore transfers. The tracing result diverges from an ordinary transaction-by-transaction calculation, so the year is modelled as a whole.

Business investment relief does not sit with the facility on either of two counts. Under s 809VC(4) ITA 2007 an investment is a qualifying investment only if it is made before 6 April 2028 and if none of the money or other property used to make it is TRF capital.

## The arithmetic of the decision

The charge is calculated on the gross amount of capital designated rather than on the gain or income within it, and it does not vary with the tax that an ordinary remittance would have produced. The comparison is therefore a simple one: 12% or 15% against the full income tax and capital gains tax rates that the same remittance would attract. Finance Act 2026 itself supplies the upper end of the reference scale: from 2026-27 the dividend upper rate rises to 35.75% and the dividend ordinary rate to 10.75% (s 4), and from 2027-28 savings and property income rates are set at 22%, 42% and 47% (ss 5 and 7). The overall shape of the reform in which those rates sit is set out in [the 2025 non-dom reform](https://wiki.private.law/en/uk-non-dom-2025).

Several factors shift the calculation and are routinely missed.

1. The two-designation requirement increases the base, not merely the number of entries on the return. Where an amount is qualifying overseas capital on both grounds, the charge is paid on each, and the effective cost of clearing the sum rises accordingly.
2. The step from 12% to 15% is a quarter more. Deferring a designation from 2026-27 to 2027-28 raises the cost of the same sum by 25% in relative terms.
3. The charge sits outside income tax proper and therefore fails to act as tax where that matters. It does not frank Gift Aid, it is not a payment of income tax or capital gains tax for foreign tax credit purposes, and on HMRC's view it falls outside a double taxation convention that covers taxes on income and capital gains but not taxes on capital (RDRM73400).
4. Designated amounts stay out of total taxable income and gains, do not affect adjusted net income, band thresholds or pension input thresholds, and do not attract payments on account for the following year under s 59A TMA 1970 (paragraph 9(6); RDRM73310). For a client sitting near a threshold that is a point in favour.
5. Designation does nothing for future income generated by the designated capital. Capital invested after being cleared produces ordinary taxable income, and that income cannot be designated: only amounts arising before 6 April 2025 qualify.
6. Designation is worth making only for amounts that will genuinely reach the United Kingdom, or that need clearing for some other reason. If designated money is spent abroad the charge is lost: there is no repayment, and other funds cannot be substituted for the designated amount that has been spent.
Alongside the facility sits the second transitional lever, rebasing foreign assets to their 5 April 2017 value. For long-held assets that have appreciated substantially it can be worth more in absolute terms than designation, so the two are modelled together and asset by asset; the conditions and limits of rebasing are set out in [remittance basis after 6 April 2025](https://wiki.private.law/en/uk-remittance-basis-after-2025).

## Where a designation is wrong or was missed

What can be done depends on the stage at which the error surfaces.

1. Within the amendment window. Paragraph 8(6) does not prevent a return being amended to alter or revoke a designation under s 9ZA TMA 1970 within twelve months of the filing date — stated expressly by new paragraph 9(8), inserted by Finance Act 2026. The amendment window matches the election deadline and, where a notice to file was issued after the 31 October following the tax year, extends to three months from the date of that notice (RDRM73320).
2. Outside that window. The designation cannot be withdrawn. The charge is not repayable even where the designated amounts can no longer be remitted. Overpayment relief is unavailable on a formal ground: it covers overpaid income tax, capital gains tax, Class 4 NIC and corporation tax, and the TRF charge is none of these.
3. Where the designated amount turns out not to be what it was thought to be. The credit under paragraphs 8(6A) to (6B) applies, but only in combination with an officer's action for 2024-25 or an earlier year, and at the price of losing the right to revoke.
4. Where the election was not made in time. The legislation contains no discretion to accept a late designation election; the question falls back on HMRC's general late claims policy, a materially weaker position than an in-time amendment.
> ⚠️ Because the amendments are retrospective, designations already made for 2025-26 must be rebuilt on the new rules rather than treated as affected only from a future year. Three points call for review first: whether the basis of each designation is stated as new paragraph 8(2)(aa) requires; whether a second designation has been made where an amount is qualifying overseas capital both as pre-6 April 2025 income or gains and as a matched capital payment; and whether the value designated for an asset is the value of the underlying income when it first arose rather than a current valuation. HMRC guidance on this ground is uneven — the pages on reliefs and on asset valuation have been rewritten for Finance Act 2026, while the description of the designation format at RDRM73310 does not yet carry the new requirement — so the statutory text governs.

> 🍓 Designation is the only act that buys the reduced rate, and it can be made only in a return, only by an individual UK resident for that year, and only by someone who spent at least one tax year on the remittance basis before 2025-26. The rate follows the year of the return carrying the designation: 12% for 2025-26 and 2026-27, 15% for 2027-28, with the window closing on 5 April 2028. Finance Act 2026 made the exercise both dearer and more intricate with retrospective effect: one sum qualifying on two grounds needs two designations and two charges, s 732 ITA 2007 deemed income is inside the perimeter, capital is valued when it first arose, and the charge credited against an assessment for an earlier year costs the right to revoke. An error is correctable for twelve months; after that it is final.

## Q/A

### Does the rate depend on the year the money is brought into the United Kingdom?

No. Under paragraph 1(8) of Schedule 10 Finance Act 2025 the rate is set by the tax year of the return in which the amount is designated. Once the charge is paid the designated amount can be remitted at any time without further tax, and an amount left offshore stays clear indefinitely.

### Why are two designations of the same amount needed?

Because one sum can be qualifying overseas capital on two separate grounds — as pre-6 April 2025 income or gains, and as a trust capital payment matched with trust gains. Paragraph 8(2C) prevents a designation made on the remittance-provision basis from counting as a designation under paragraph 3 or 5, and paragraph 8(2D) expressly requires two designations to secure all the available reliefs. The charge is payable on each.

### Can an asset be designated without selling it?

Yes. What is designated is the amount of pre-6 April 2025 foreign income and gains from which the asset derives, valued when it first arose (paragraph 8(2A)). No valuation of the asset at the designation date is required. Rebasing to 5 April 2017 does not affect the amount designated.

### How long is there to correct a designation?

Twelve months from the filing date, under s 9ZA TMA 1970; new paragraph 9(8) confirms that paragraph 8(6) is no obstacle. Outside that window the designation cannot be withdrawn, the charge is not repayable, and overpayment relief does not apply to it. Separately, where the charge has already been credited against an assessment for 2024-25 or an earlier year, the right to revoke is lost regardless of the window.

### Is the charge a tax for double taxation convention purposes?

On HMRC's view, no. The charge is treated as a charge on capital, so where a convention covers taxes on income and on capital gains but not taxes on capital, the charge falls outside its scope. For the same reason it does not frank Gift Aid and does not count as a payment of income tax or capital gains tax.

### What happens to designated capital held in a mixed account?

It comes out first: Step A1 in s 809Q(3) ITA 2007 places TRF capital ahead of every other kind of income and capital and displaces the usual last in, first out rule for it. The corollary is that designated capital is equally consumed, proportionately, by offshore transfers unless it is segregated into a nominated TRF capital account under s 809RZB.

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## Factual claims

- Under paragraph 1(8) of Schedule 10 the charge is set by the tax year of the return in which the amount is designated.
- The election deadline is twelve months from the ordinary filing date, that is the anniversary of the 31 January following the end of the tax year (paragraph 8(1); HMRC RDRM73320).
- Three conditions must each be satisfied (paragraph 1; RDRM73200).
- Paragraphs 9 to 17 of Schedule 3 amend Schedule 10 Finance Act 2025, and paragraph 18(1) makes them retrospective in the words "has effect, and is to be deemed always to have had effect".
- Paragraph 9 inserts new sub-paragraph (1A) into paragraph 7 of Schedule 10 and brings income deemed to arise under s 732 ITA 2007 — the benefits charge in the transfer of assets abroad code — within the facility.
- New paragraph 8(2A) fixes the value of qualifying overseas capital at its value when it first arose to the individual.
- The general rule in paragraph 8(3) allows only the net amount to be designated after deducting relevant foreign tax paid or payable.
- New paragraphs 8(6A) to (6C) close an old asymmetry.

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