The basic rule is that a person is domiciled in the country in which they have their home permanently or indefinitely – the country you regard as your homeland – ‘the place where you intend to die’. You can live in Spain for years and remain domiciled in the UK.
Anyone deemed UK-domiciled is liable to 40% UK inheritance tax (IHT) on their worldwide assets (above the allowances). Transfers to spouses/civil partners are exempt, provided you are both UK domiciled. Non-UK domiciles remain liable to IHT on UK assets.
Types of domicile
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Domicile of origin – UK common law ascribes a domicile of origin to every individual at birth. Generally the father’s domicile, or the mother’s if single.
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Domicile of dependence – applies to women married before 1974, minors and legal dependents.
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Domicile of choice – As HM Revenue & Customs explains, “any individual who has legal capacity can acquire a domicile of choice”.
To acquire a domicile of choice you must be physically present and tax resident in your new country and intend to live there permanently or indefinitely.
Since HMRC could look for indications you see Britain as your homeland and may return in future, you need to sever as many ties as possible.
In any case, HMRC may treat you as UK-domiciled if you were UK resident for 15 of the last 20 tax year; you return to UK for more than a year, or move to a third country.
Proving domicile
Domicile determination is a highly specialist area; you need professional advice to ensure you get it right. If HMRC determine you are a UK domicile at death, your heirs will face an unexpected tax bill.
HMCR could request detailed information during a domicile enquiry, such as your place and nationality at birth; information on all residences since birth; clubs, associations etc; your wills and professional and personal advisers. You’ll need documentary evidence and perhaps personal correspondence, electronic records etc.
Remember, it may be your heirs and/or executor who have to deal with this, so leave the paperwork in order for them.
Professional, specialist advice specific to your circumstances and intentions is essential here.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com
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