Paragraph 5, Schedule 9 of the Finance Act 2025 inserted the emboldened wording to section 809P(12) ITA 2007 concerning the ‘re-remittance’ of foreign income and gains:
“if the amount remitted (taken together with any amount previously remitted that has been charged to tax) would otherwise exceed the amount of the income or chargeable gains, the amount remitted is limited to the amount which (when taken together with any amount previously remitted that has been charged to tax) is equal to the amount of the income or chargeable gains.”
The legislation refers to the treatment of remittances to the UK where the relevant foreign income and/or gains (“FIGs”) had previously been remitted to the UK, but not charged to tax- usually because the taxpayer was not UK resident in the remittance year and did not subsequently fall within the temporary non-residence rules.
The wording of s.809P(12) ITA 2007 prior to the FA 2025 tweak was widely accepted by the tax profession to mean that FIGs could be remitted to the UK at a time when this remittance was not taxable and that would ‘cleanse’ those FIGs such that they could be used freely in the UK thereafter- for example when the taxpayer resumed UK residence having been away for 6 years.
The addition of the emboldened wording now seems to mean that such cleansing will no longer be effective and if these income and gains are subsequently re-remitted to the UK, this later remittance may be charged to UK tax.
Of some concern is that HMRC set out their view on the FA 2025 amends in written correspondence with the CIOT stating that the amends to the legislation in fact simply reinforce/ clarify what has always been the HMRC view- that second/ subsequent remittances are only ever relieved from tax if the first occasion of the remittance had been charged to tax.
Perhaps as a result of this confusion/ conflicting views between industry experts and HMRC, a relief was introduced at Amendment 24 (“Relief for amounts remitted again on becoming UK resident”) to the Finance Act 2025 to limit the impact of the insertion of the new wording to future action only. The relief operates by treating the original remittance as having been taxed so that future re-remittances are not charged to tax. The wording of Amendment 24 possibly adds further uncertainty but the intention is to limit the retrospective impact of the FA 2025 wording.
In short going forward, relief should be available to individuals who cleansed and re-remitted funds prior to 6 April 2025. It will not help:
· Individuals who remitted FIGs to the UK in a non-UK resident period but have not yet re-remitted the FIGs to the UK;
· Individuals who have not been UK resident in 2024/25 or 2025/26;
· Individuals who have made a claim for split year treatment in either 2024/25 or 2025/26;
· Taxpayers who have previously ‘cleansed’ their FIGs by remitting these at a time when they were not subject to tax, for a reason other than a period of long term non-residence. This includes those with a period of non-residence of less than 5 years but where the temporary non-residence rules do not apply (for instance because they were UK resident for fewer than 4 of the 7 years before becoming non-resident) and those who have made a remittance of FIGs which were not subject to tax due to the availability of their personal allowance/ annual exempt amount.
Action Points
Some taxpayers may need to regularise their tax position with HMRC where the re-remittances of perceived cleansed funds have been treated as taxable.
Individuals who had been advised that FIGs were cleansed (but may in fact not be) and could be treated as clean capital may have ceased to operate account segregation meaning clean capital is now be buried deep beneath the affected FIGs. A mixed fund analysis may be required.
Anyone affected should take professional advice.
