Cleansing for non-doms - last chance saloon?

01 March 2019

What has changed?

Reforms made to the UK’s remittance basis of tax regime (applicable to non-UK domiciled individuals) took effect from 6 April 2017. The reforms introduced a new ‘deemed’ domiciled status for UK income tax and capital gains tax (CGT) purposes which is, broadly, similar to the long established ‘deemed’ domiciled rule which previously applied for UK inheritance tax (IHT).

Under the new ‘15/20 year’ rule, once a UK resident, non-UK domiciled, individual (an RND) has been UK tax resident for 15 out of the previous 20 tax years they become ‘deemed’ UK domiciled for UK income tax, CGT and IHT purposes from the start of their 16th tax year of tax residence, bringing them within the scope of worldwide taxation.

The reforms bring into place a new level of UK personal tax compliance (and liability to UK tax) on non-UK sources of income and capital gains for RNDs who had, historically, claimed the remittance basis in the UK and not remitted their non-UK source income and gains to the UK. Those who were deemed domiciled in the UK from 6 April 2017 will have just filed their UK tax return to report their world-wide income and gains for 2017/18.

As part of the rule changes, two valuable concessions were introduced:

  • The ability to un-mix or ‘cleanse’ mixed fund cash balances if action is taken by 5 April 2019
  • The ability to rebase certain non-UK assets for long term RNDs for future disposals.

In isolation, these two concessions are beneficial for RNDs affected by the new rules. However, the interaction of the concessions can also give rise to new sources of valuable ‘clean capital’, which can be remitted to the UK efficiently. In the right circumstances, it may also be possible to benefit from these concessions beyond 5 April 2019 if remittances to the UK are planned carefully.

Cleansing before 5 April 2019

Where a non-UK bank account contains a mix of unremitted non-UK source income, gains and tax-free (clean) capital, the UK tax rules prescribe the order in which each element is deemed to be remitted to the UK. For example, untaxed income of the latest year is generally treated as being remitted first, then gains from the latest year and so on with the clean capital treated as the last tranche. This can make it hard for a RND individual to access their original clean capital without triggering tax charges.

As a transitional measure following the changes from April 2017, the Government introduced a limited two year concession (which runs out on 5 April 2019) to allow RNDs to cleanse their mixed fund cash balances and allow them access to remit constituent parts in the most tax-efficient manner.

The concession applies to all RNDs (not just those becoming ‘deemed’ domiciled from 6 April 2017) provided they were subject to and claimed the remittance basis for a tax year at some point between 2008/09 and 2016/17 inclusive. However, the concession does not apply to RNDs with a historic UK domicile of origin.

Assets sited outside the UK that were purchased from (or derive from) different sources of income, gains and capital can also be cleansed - but the asset must first be disposed of to leave a cash amount to be cleansed.

Care is required to ensure that the origins of the constituent parts of a mixed fund cash balance can be determined with accuracy (and adequately evidenced). It is also vital to ensure that a transfer qualifies as an appropriate ‘nominated’ transfer. Failure to meet these requirements will mean that the concession will not be available and the normal mixed fund rules will apply to transfers made.

Is there time?

In simple situations it may be possible to identify the constituent parts comprising a mixed fund and to make the appropriate nominated transfer by 5 April 2019. However, in practice, where there are multiple accounts and portfolios, which may have been reinvested several times over, it is likely to be a very time-consuming and expensive exercise and realistically may not be possible to do by the deadline.

BDO’s experience in dealing with mixed funds has led us to identify a simpler solution which focuses only on the clean capital element, which is then subject to certain adjustments before making a nominated transfer. We believe this is a more effective, and conservative, way of handling complex situations which is intended to eliminate the possibility of ‘over nominating’.

In this manner, if a client still wishes to access some of their original clean capital, it should be possible to deal with this by 5 April 2019. Interested persons should contact us as soon as possible if they wish to pursue the matter before the opportunity is lost.


Where a RND individual becomes deemed UK domiciled under the 15/20 rule, subsequent capital gains made on the disposal of assets (whether UK or offshore) would automatically trigger a UK CGT charge because they are then taxable on their world-wide income and gains.

However, for RNDs who became deemed UK domiciled on 6 April 2017 (and no later) and who were not born in the UK with a UK domicile of origin, the proportion of any non-UK gain that accrued prior to 6 April 2017 on a non-UK asset still held at that date will not be taxable. This would also allow that proportion of gain to be brought to the UK with no further tax charge.

To achieve this ‘rebasing’, assets held personally by RNDs outside the UK will be revalued for CGT purposes as if they were acquired on 6 April 2017 (effectively exempting the earlier gain, which should become a new source of ‘clean capital’ for the RND).

Where the rebased assets were originally acquired with unremitted non-UK source income or gains, there would still be UK tax on a remittance of proceeds in excess of the rebased non-taxable gain (ie the original cost of the asset if acquired with non-UK source income or gains).

However, it may be possible to separate the proceeds (once received into an offshore bank account) into their constituent parts using the un-mixing concession (see above). Where this is achieved, the gain element between April 2017 and disposal will have been subject to UK tax so can be remitted without further charge. The  rebased gain element (arising from the purchase date to April 2017) can also be accessed - effectively on a tax-free basis.

Rebasing applies automatically where a number of conditions are met including:

  • The asset must not have been brought to or situated in the UK at any time between 16 March 2016 and 5 April 2017
  • The RND wishing to benefit from rebasing must have paid the remittance basis charge (which was introduced from 6 April 2008) in any year before April 2017 and be deemed domiciled throughout the period from 6 April 2017 to disposal
  • The individual must have also been UK resident as at or ‘on’ 6 April 2017.
  • Importantly, the individual must remain non-domiciled under general law.

An irrevocable election can be made to dis-apply rebasing on an asset by asset basis. This may be worth considering, for example, where assets are standing at a loss compared to the purchase price.

It is important to note that the rebasing also applies to certain non-UK fund investments (the gains from which can be subject to UK income tax rather than CGT).

Do I have to sell by 5 April 2019

To make maximum use of both the cleansing and rebasing concessions, non-UK assets would have to be disposed of by 5 April 2019 and an appropriate nominated offshore transfer of clean capital would have to be made by then also. Indeed, for RND’s who do not qualify for rebasing, 5 April 2019 represents a hard deadline.

However, where the original source of clean capital to acquire an asset is likely to be impossible (or economically not viable) to ascertain but, nevertheless, there is still a significant rebased gain element (from purchase to April 2017) for qualifying RNDs then, in the right circumstances, it may be desirable to retain the asset beyond 5 April 2019.

Although there is not yet an established tax treatment in this area, it seems logical that the rebased gain element of eventual disposal proceeds of an offshore asset would be considered to arise in the tax year of actual disposal. Therefore, with careful analysis, we consider that it should be possible for the rebased element of gain to be remitted into the UK out of disposal proceeds on a ‘last in first out’ basis without triggering a further tax charge - even if the disposal occurs after 5 April 2019.

If you are interested in discussing this area further, please contact us.


With careful and appropriate calculations and action, RNDs can make use of the concessions to realise new sources of clean capital and access previously mixed funds in a way not previously possible. Using BDO’s simplified and practical approach should help to access at least a portion of clean capital even with limited time available.

The concessions do, however, only offer a limited window of opportunity and time is of the essence to take appropriate action.

We have assisted a number of individuals to make the most of these concessions and will be happy to explore how we can help you. Please contact Lee Bijoux or your usual BDO contact to discuss this opportunity in more detail.