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When the government enacted the Temporary Repatriation Facility (TRF) in March 2025, some advisers urged swift action. Some UK resident settlors were encouraged to unwind longstanding excluded property trusts, accelerate capital distributions, and “cleanse” legacy foreign income and gains (FIG) at the highly attractive 12% TRF rate. For many, it felt like a once‑in‑a‑generation opportunity.
But in some cases, speed came at the expense of clarity.
Over the months that followed, it became clear that where trusts were initially funded by UK resident settlors with FIG subject to the remittance‑basis —crucial aspects of the TRF had been either misunderstood or entirely missed. The result: some settlors acted on advice that may now prove to have been incomplete, optimistic or simply wrong.
What really changed: the TRF that wasn’t what many thought
When the Finance Act 2025 introduced the TRF, the Chartered Institute of Taxation (CIOT) quickly identified a core ambiguity: If a UK‑resident settlor had (i) originally funded an offshore trust with foreign income or gains subject to the remittance basis that (ii) had generated further foreign income and gains over time, did the TRF require one designation… or two?
The difference was potentially significant
- One designation → 12% TRF charge
- Two designations → up to 24%, because both the original FIG and the matched trust FIG would need to be designated separately in respect of the same trust distribution.
Some advisers assumed the answer must be “one,” and advised clients accordingly.
Then, in November 2025, the government released draft amendments stating that two designations had always been the intended outcome for this UK resident settlor scenario, calling it a “clarification” rather than a change.
It’s also proposed that these clarifying amendments apply retrospectively from 6 April 2025.
A perfect storm of ambiguity and time pressured advice
Some trustees and settlors may have relied on urgent advice presented at the time as definitive. There was also a desire to mitigate inheritance tax charges on these trusts going forward. However, they are now discovering:
- The legislation was highly technical
- The TRF interaction with historical remittance‑basis FIG was poorly understood
- The risk of two TRF charges was not always highlighted
- Further inheritance‑tax reforms (which could not be predicted)—such as the new £5m cap on ten‑year charges for pre‑30 October 2024 excluded property trusts—also impact the rationale for early unwinding/downsizing in respect of trusts worth more than £83.5m).
Where clients stand now — and what they can do
Whilst some may consider the potential 24% rate still a good outcome, the fallout from this “clarification” is already prompting settlors and trustees to explore their options, in the hope of finding a solution before any tax return claiming the TRF is due. These include:
Applying to court under the doctrine of mistake
Where decisions were based on a misunderstanding of tax consequences, the court can—in the right circumstances—set aside those decisions. The application involves showing that a party has made a genuine mistake and did not intend the transaction to have the effect it did. These applications are highly fact‑specific and require sophisticated trust, tax and litigation input which our expert team is well placed to provide.
There may be other court remedies available, depending on the specific circumstances. We can identify the best options for each client’s situation.
Considering professional negligence claims
If advisers failed to flag legislative ambiguity and explain worst‑case TRF outcomes, which have resulted in a higher than advised tax liability, a negligence claim may be appropriate.
In parallel with taking practical action to rectify the situation, it is important for UK resident settlors and trustees to explore this option where necessary, so that any additional costs associated with taking remedial action can be recovered and appropriate notifications made to insurers..
Why Michelmores is uniquely placed to help
What trustees and settlors now need is a firm that understands not just tax, not just trust law, and not just litigation, but the intersection of all three.
Michelmores is one of the few firms that can offer:
- Integrated tax, trusts, and litigation expertise
We do not silo these skillsets. Our specialists work together seamlessly when dealing with structures that can unravel (or be saved) depending on the smallest technical detail. Where applications are made in offshore jurisdictions we collaborate with local counsel to offer a smooth and coherent approach for the client.
- Deep experience challenging defective trust decisions
From mistake applications to trustee‑protection strategies, our team has handled the most complex and sensitive cases.
- A pragmatic approach—always with an eye on reputational and relational risk
We help clients resolve issues without unnecessary escalation, while protecting both trustees and settlors.
Our team would be happy to discuss if you have been impacted by any of the issues raised in this article.