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Designation in the year of remittance

Partial designations

Designation of uncertain amounts

Designation in the year of remittance

There is no obligation, under the temporary repatriation facility (TRF), for designated qualifying overseas capital to be remitted in the year of designation. However, an individual may find at the end of a tax year, during the TRF period, that they have remitted amounts of foreign income and gains that it would be beneficial for them to designate.

A remittance takes its ordinary meaning in line with section 809L ITA 2007 � see RDRM33020 for guidance on identifying remittances.

When an individual makes a designation, although they will actually make their designation in their Self Assessment tax return after the tax year end, the designation is treated as having taken place at the start of the tax year to which the return relates. So, for example, any amounts that an individual remits in the 2025-26 tax year and then designates in their 2025-26 return will be treated as designated qualifying overseas capital from 6 April 2025.

This means that if an individual remits an amount in a tax year and does not designate it in their Self Assessment tax return for that same tax year, then it will be an ordinary remittance of foreign income and gains taxed at the usual tax rates, because the amount was not designated qualifying overseas capital when it was remitted. Designating the amount in a later year of the TRF period would not reverse or prevent the tax charge on the remittance in the earlier year. Instead, an individual would need to amend their Self Assessment tax return for the tax year in which they remitted the amount, if they are still within time to do so.

Example 1

Harmina is a UK resident and former remittance basis user. On 6 April 2025 she had an overseas bank account with a balance of £8m made up entirely of pre-6 April 2025 foreign income.

On 1 May 2025, Harmina purchased a house in Kuala Lumpur for £5m and a racehorse in Ireland for £1m. She gives £1.5m to her friend Faisa who lives in Malaysia, so £500,000 remains in her account.

On 1 June 2025, Faisa uses the £1.5m she was gifted from Harmina to buy a holiday home in Cornwall. Faisa agrees to let Harmina use the house in Cornwall as her second home rent free. Although Faisa is the legal owner, it is understood between them that Harmina can come and go to the house in Cornwall as she pleases, and that Faisa will need to inform Harmina in advance if Faisa plans to visit.

On 1 July 2025, Harmina arranged for the racehorse to travel from Ireland to its new stables in the UK where it will live permanently. To fund the transport of the horse to the UK and to cover its initial stable costs, Harmina arranges to receive a loan from an overseas bank. The bank provides Harmina with a loan of £2.5m using Harmina’s house in Kuala Lumpur as collateral.

On 31 January 2027 when completing her 2025-26 tax return, Harmina realises that her use of Faisa’s house in Cornwall, her transfer of her racehorse from Ireland and the collateral offered to secure the loan she has received from the overseas bank would all need to be quantified in order to determine her taxable remittances under section 809L ITA 2007.

Harmina has remitted a total of £5m, as follows:

• 1 June 2025 â€� £1.5m gifted to Faisa which Harmina started to enjoy in the UK (see RDRM33220)
• 1 July 2025 â€� £1m when the racehorse, which derives from her foreign income, was brought to the UK (see RDRM33150)
• 1 July 2025 â€� £2.5m used in respect of a relevant debt when the house in Kuala Lumpur was offered as collateral (see RDRM33170)

As Harmina remitted the amounts in 2025-26 she must designate them in her Self Assessment tax return for 2025-26 if she wants to benefit from the low tax rate (see RDRM73320 for when she must make her designation by). If she does, the amounts will be treated as designated qualifying overseas capital from 6 April 2025 and she will pay the TRF charge on these amounts. If Harmina does not designate all of the £5m, then some or all of the remittances will be ordinary remittances of foreign income taxed at the usual Income Tax rate, because the amounts were not designated qualifying overseas capital when she remitted them. It would be too late to designate them in her tax returns for either the 2026-27 or 2027-28 tax year.

Partial designations

Individuals can choose the amount of pre-6 April 2025 foreign income and gains that they would like to designate and there is no obligation for an individual to designate the total of their pre-6 April 2025 income and gains, meaning that partial designations can be made.

Once a designation has been made, the designated qualifying overseas capital will be available for remittance at any time in the future without incurring any further tax charges. If the amounts of designated qualifying overseas capital are within a mixed fund, they will be remitted in priority to all other income and capital in the mixed fund � see RDRM75100 onwards.

Example 2

Guido is a UK resident and former remittance basis user. He has an overseas bank account which on 6 April 2025 contains the following:

• £10,000 of foreign income from 2023-24
• £25,000 of foreign income from 2024-25
• £30,000 of foreign gains from 2024-25

Guido can choose to make a partial designation of any of these types of income and gains, and he is not obligated to designate all of that type of income or gain.

Guido decides to remit £5,000 of his foreign income from 2023-24 and £11,000 of his foreign gains from 2024-25. He will make a designation election in his tax return for 2025-26 in the amount of £16,000.

See RDRM75100 onwards for an explanation of how a partial designation would change the make-up of a mixed fund and affect the mixed fund ordering rules, including examples where further amounts have been deposited and there are subsequent remittances from the fund.

Designation of uncertain amounts

Where an individual is unable to identify the contents of an account or the composition of an asset, which may be a mixed fund, it will still be possible to make use of the TRF without having to identify each source of income and capital contained within the fund. See RDRM72300 which sets out how uncertain amounts can be qualifying overseas capital.

Example 3

Lili is a UK resident and former remittance basis user. On 6 April 2017 Lili became deemed domiciled in the UK. Lili has an overseas bank account from which she has never made remittances to the UK. The account contains £300,000 but Lili has not kept records as to the source of all of these funds, although she can show that £50,000 of the balance is income that was received since 6 April 2017 and was taxed in the UK on the arising basis.

Lili thinks that a further £100,000 may relate to a gift she was given by her sister in the 2015-16 tax year, but it could also be a foreign dividend from the same year.

Since Lili can show that £50,000 of the funds relate to income that has been taxed on the arising basis, this will not be qualifying overseas capital and Lili can remit these funds to the UK without a further tax charge, subject to the mixed fund ordering rules.Ìý

As Lili is not aware of the source of the remaining funds, she could make an election to designate all £250,000 under the TRF in the 2025-26 tax year. Provided that this designation was made, and the TRF charge was paid, Lili could begin remitting these funds to the UK without any further tax charge or requirement to identify their source.

If Lili were able to establish that £100,000 of the funds related to a gift then this too would not be taxable on remittance and so would not need to be designated. If Lili located this evidence after she had designated the £250,000 and paid the TRF charge she would need to amend her tax return within the appropriate time limit because an election is irrevocable, even if it is found subsequently that an amount could not have been qualifying overseas capital (see RDRM73320).

Lili decides to designate the £250,000 in her Self Assessment tax return for 2025-26, which she files on 31 January 2027. By deeming these funds to be qualifying overseas capital and electing to designate them under the TRF, Lili can then remit these funds to the UK without any further need for review.Ìý

However, 6 months later, Lili finds records of a bank transfer of the £100,000 to her account from her sister’s account on 14 May 2015. Lili has established that the £100,000 is clean capital and she is within time to amend her 2025-26 designations, however, Lili must do this by 31 January 2028, otherwise the designation of the £100,000, and payment of the TRF charge of £12,000 on this amount, is irrevocable.