Written by Ray Coman
In broad terms, a person not domiciled in the UK could avoid UK tax on foreign income and gains. Consequently, a UK resident who is non-domiciled could significantly reduce their tax liability. This guide offers an overview on how domicile is decided for UK tax purposes.
Domicile of origin
You would be domiciled in the country in which you have a permanent home. An individual cannot have more than one current domicile in accordance with UK law. Domicile of origin is, from birth, the father's domicile, or where the child is born out of wedlock or born after the father's death, the mother's domicile.
Domicile of dependence
Once the domicile of origin is established, it may be displaced by a domicile of dependence until the child reaches the age of 16. This means:
- Where the parents are living together, or where they are living apart and the child has his home with the father, the child's domicile will follow that of the father.
- Where the parents are living apart and the child has his home with the mother only, the child's domicile will follow that of the mother.
In other situations a domicile will follow that of the person that a child is dependent on, until that child reaches the age of 16. Prior to 1974 a woman acquired her husband's domicile.
Domicile of choice
A domicile of origin or dependency will continue unless and until displaced by a domicile of choice. A domicile of choice can only be acquired once a person has reached the age of 16, and requires two elements:
- The fact of residence in a particular country, and
- The intention to reside indefinitely in that country.
No formal steps are necessary to acquire a domicile of choice. A chosen domicile will be determined based on individual circumstances. Relevant factors include nationality, citizenship, residence, family, social, property and business interests, wills and the reservation of a grave plot.
In practice, if a person chooses to make the UK their domicile, HMRC have stated that they are unlikely to challenge this. By contrast, if a person proposes to be non-domiciled, HMRC are more likely to require further evidence in support of this, particularly if born in the UK.
Complex issues can arise for domiciled individuals on whether, and if so, when to remit funds to the UK. Coman & Co. have wide experience advising on the tax implications of UK residency and domicile. Please contact us to make an arrangement to discuss your requirements.