Press Room

9 Dec 2018

Deadline approaching for non-doms to “cleanse” offshore mixed accounts

9 December 2018

A non-dom claiming the remittance basis of taxation is exempt from tax on most offshore income unless the income is remitted to the UK.  However, where an individual has a bank account including various types of funds, the account is a “mixed fund”.  For example the account may contain a mixture of income (taxed at 45% if remitted) and capital (for example a gift or bequest, not taxable at all).  Under normal rules, an individual remitting from such an account may be deemed to remit income first, before being able to access the underlying capital.

To help relieve the pain of the “deemed domicile” rules introduced on 6 April 2017, the government introduced a time-limited tax break allowing non-doms to “cleanse” their offshore bank accounts in order to access and remit any tax-free capital without having to first remit the income.  Further details can be found here, and the rules are broadly as follows:-

  • The relief is available for non-doms who have been taxed on the remittance basis at some point between 2008 and 2017.  It is not available to individuals born in the UK with a UK domicile of origin who subsequently gave up their UK domicile.
  • Only money can be cleansed.  A mixed fund can also include investments, and these will need to be sold in order to separate out different components (e.g.  to separate out any non-taxable base cost from any “gain” element, so that the base costs can be remitted).
  • Cleansing is not available to mixed accounts held by a trust.  The funds have to be distributed out of the trust before they can be cleansed.  The distribution itself is likely to have tax consequences, particularly if the recipient or settlor is already deemed domiciled.
  • The cleansing is carried out by identifying the proportion of income, gains or capital within a bank account, and then transferring the relevant category into another offshore account and making a nomination.

This window of opportunity closes on 5 April 2019.

On the face of it, the concession appears straightforward.  However, from a practical perspective the mechanics are complicated.  To give a couple of examples (there are many), (i) if the nominated amount of income, capital etc, exceeds the actual amount of income or capital, then the entire nomination is invalid, (ii)  if the account contains pre-2008 funds then different rules apply.

The CIOT, ICAEW, STEP and Law Society have prepared a Q&A document summarising the key areas of uncertainty.  The document can be found here and it includes some helpful clarity from HMRC. However various outstanding questions remain to be answered, which is disappointing in view of the limited window of opportunity for non-doms to take advantage of this relief.


Individuals wishing to cleanse their offshore accounts would generally be advised to only transfer out funds they can clearly identify.   Anything that cannot be identified should be left in the account.   Furthermore, individuals should exercise caution and under- rather than over- nominate (although over nominations can be reversed if spotted before 5 April 2019).   Note also that mixed fund cleansing can be combined with the automatic 5 April 2017 rebasing of  offshore assets (available to individuals who became deemed domiciled on 6 April 2017).  The combination of cleansing and rebasing may increase the amount that can be remitted to the UK at a lower tax rate.

The relief is particularly welcome to American taxpayers who may have already paid US tax on the non-UK income, and who may (in the absence of the relief) be subject to actual double taxation when they remit offshore funds.   Therefore Americans who might want in future to remit offshore funds to the UK should consider cleansing their offshore bank accounts before 6 April 2019.

Julian Nelberg

Julian is Head of the Private Client group at Andersen LLP. His clients include international high net worth individuals, senior executives, trusts and companies.

Email: Julian Nelberg