There is a potential solution for remittance basis users with mixed funds.

We are currently in a two year window expiring on 5 April 2019 where individuals can rearrange their overseas mixed cash funds so that they can be separated into their constituent parts (i.e. income, capital gains, income gains and clean capital).

To benefit, you need to have been resident in the UK at some point, and have used the remittance basis of taxation. However, if you were born in the UK and have a UK domicile of origin, you will not be able to cleanse your funds.

For example, say you have recently sold your apartment in Venice for £1.25M and made a capital gain of £250,000. If you deposit the sale proceeds into your Italian bank account, you will be able to segregate the capital gain and the original capital into separate accounts. You would then be able to remit the clean capital of £1M into the UK, at any time with no tax charge.

If the mixed account is more complicated and you can’t easily identify each separate part, but you can identify the original clean capital, you will still be able to transfer the clean capital without identifying the rest of the funds.

The main thing to remember is that this opportunity to cleanse funds, only applies to cash deposits and not assets. So, if you keep the apartment in Venice, you would not be eligible for cleansing. You may want to consider whether there are any assets standing at a gain that you might wish to dispose of before 5 April 2019 whilst the window of opportunity to cleanse is still open.

So what do you need to do? You need to make a transfer of money from your offshore mixed fund account, Account A, to one or more different segregated offshore accounts, and nominate the transfers of income, capital and gains before 5 April 2019. There is no formal nomination process, but you need to keep a record and retain details of the bank transfers. The transfers from Account A need to be done on the same day, and once this has been done, no further nominations can be made from Account A, so it is very important to analyse the composition of the account carefully.

If you cannot immediately identify all of the component parts of the original account, it would be best to transfer all the funds out of Account A to new segregated accounts, including a new mixed fund account, just in case you can identify the funds before the window closes. You can then still make a nomination in relation to that mixed fund account, which you would not be able to do if the funds remained in Account A.