UK Domiciled…Or Not?
3 Jul 2017
As more and more individuals leave the UK to live or work abroad, the significance of domicile will become more important. Previously, determination of domicile could be sought from HMRC (Her Majesty’s Revenue and Customs) on DOM1, but now they will only look at this question when there is a chargeable transfer for IHT purposes.
Trying to change domicile to a domicile of choice in another country, where estate duty does not apply, is difficult. As in the case of Richard Burton, the actor, who lived in Switzerland for the last 26 years of his life and was buried there; his request to be buried in a red suit with a copy of Dylan Thomas’ poems, added to the fact that the coffin was draped with the Welsh flag, attracted the attention of HMRC. Burton’s continuing ‘attachment’ to Wales resulted in a large inheritance tax bill!
Another historical case involved the late British financier Sir Charles Clore, who had retired to Monaco for tax reasons; HMRC investigated in detail when he died. It was clear from friends and acquaintances that Clore was not happy in Monaco and spent much of his time in Paris, further mentioning to those close him that he longed to return to England. On his death, HMRC went to the trouble of calling witnesses to Court to testify that Sir Charles had not been happy in Monaco and longed to return to the UK, which was fatal to the claim of non-domicile.
Soon, non-UK domiciles who have been resident in the UK for 15 out of the last 20 tax years will acquire a UK ‘deemed’ domicile, which applies even for a period after they leave the UK. British born and bred individuals who have sought to change their domicile will, on becoming resident again in the UK by design or accident, have their UK domicile revert.
What to do?
These are seven things to check to prevent the tax office dictating your domicile as being the UK:
1. Ensure you do not become UK resident under the statutory residence test.
2. Couples who married before 1 January 1974 are still subject to the old rules on a wife taking her husband’s domicile, which may be foreign.
3. Certain double tax treaties override the deemed domicile rules e.g. UK/India.
4. Normally a child takes their father’s domicile but in cases of husband and wife living apart it is the mother’s domicile if the child/minor is living with her.
5. New rules coming in mean that if you were not born but were brought up in the UK there might be an advantage going forward.
6. You must show you are attached to your domicile of choice as HMRC will ask for evidence.
7. If your assets for UK probate are below a certain amount no probate is required.
Finally, one aspect to consider when assessing domicile on death is where you are to be buried, or whether a grave plot in the new country of choice has been purchased. This is only one of many factors that should be undertaken. Don’t, as one individual did for humorous purposes after his death, put in your will: ‘I wish my body to be fed to the lions at London Zoo.’ HMRC is not known for their jollity in such matters and may focus on your attachment to London!
If you would like to discuss this or any other Tax and Trust issues, please feel free to contact me directly.
Jon Golding ATT (Fellow) TEP
UK Tax and Trusts Consultant Absolute Financial Solutions Ltd
Tel. +603 6203 1960 | Mobile: +6017 848 2541 | Email: email@example.com