UK Domicile or Non UK Domicile - Domicile is a legal term peculiar to English law.
Many countries, particularly those of the British Commonwealth have legal systems based upon English Common Law, many also have 'domicile' laws similar to the UK.
Think of domicile as your natural homeland. The place where you will be buried. The place where you plan to return to.
If you are domiciled or deemed domicile in the UK, your worldwide assets are subject to UK inheritance tax on death.
You can live in Spain for thirty years and own a house there, but if you were born in the UK and you keep a bank account or retain a small property in the UK, i.e. it can be clearly seen that you may intend to return to the UK to live, you worldwide estate is likely subject to UK Inheritance tax rules on death.
Domicile at Birth - your Domicile of Origin
Marriage before 1974: a wife who married before January 1974 automatically takes her husband's domicile.
Inheritance Tax For UK Domiciles
- If you are domiciled in UK, you are subject to inheritance tax IHT on worldwide assets.
- If you are domiciled outside UK, you are subject to inheritance tax IHT only on property in the UK.
- If you have moved to the UK from overseas and if you have been in the UK for at least 17 out of 20 previous years. You are deemed domicile UK and subject to inheritance tax IHT on worldwide assets.
- If you are UK domiciled and emigrate away from the UK and are not resident in the UK for tax purposes in given tax years, you are treated as UK domicile for at least 3 years after having left, you may then assume a Domicile of Choice, assuming certain basic intentions and commitments can be clearly proven.
You can acquire a domicile of choice broadly speaking by moving overseas with the intention to live there permanently and sever ties with the United Kingdom. This would mean that you may not be subject to UK inheritance tax on Worldwide assets but only on UK assets. This is easier to disprove than prove. Things that demonstrate a change in domicile:
- Demonstrate a long term, permanent intention to live overseas
- Buying a house and disposing of all property in UK
- Establishing a business or getting a job overseas
- Marriage and children overseas and you acting as a permanent part of the community
- Citizenship, passport or voting rights acquired
- Valid overseas funeral arrangements
- Breaking all ties with the UK and no, we do not mean you cannot come back and visit relatives
The onus of proof, as ever, with HM Revenue and Customs (HMRC) is on you or your estate.Losing a Domicile of Choice
Quite simply, if you move from one country to another, even if you still stay outside the UK, you automatically lose your Domicile of Choice and are back to your Domicile of Origin (at birth) again.
For example, if you live in Spain for 30 years, have acquired a Domicile of Choice in Spain, if you then move to France, you have clearly demonstrated that Spain was not your permanent home as intended and therefore, why should HMRC now believe that France will be. You will have to go through all the time constraining long winded processes to be able to prove that France is in fact now your permanent place of home with no intention of leaving.Foreign Domicile in the UK:
If you spend more than just a few years in the UK, under recent law changes you acquire a Domicile of Choice automatically in the UK and are deemed domicile. More on Foreign Domicile in UK.
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