The UK Domicile Test

If you are a British expat living overseas, can you remember the time when you lost your UK domicile status?

The subject of Domicile Status is difficult to understand. Also there is a difference between residency and domicile and from a tax perspective this is important.

Regarding residency, as far as UK tax is concerned, this is actually reasonably simple to establish since the establishment of the Statutory Residence Test (STR) in the Finance Act of 2013 – although your residency status can potentially change year on year.

As for domicile, when you are born, you are automatically assigned the same domicile as your father. This is what domicile of origin means. This won’t change. Even, if you leave the UK to take up residence in another country for a considerable time and don’t intend to return to the UK you may still remain UK domiciled or tax purposes according to HMRC.

Simply put, a UK domicile can not be lost merely by emigration.

What’s more, many people are unaware that, with a UK domicile in place regardless of how long you have been living outside the UK, it is actually one’s worldwide assets that fall under the remit of HMRC – not just those that are physically in the UK.

So, whether you like it or not, if you were born with a UK Domicile, then you can pretty much take it for granted that you will always be saddled with your UK domicile. Misunderstandings, complacency or ignorance are no defence against UK tax rules.
Given that it’s harder than you realise to lose a UK domicile, we’d certainly advise that, if you are intending to return to the UK, that any tax and estate planning should be formalised before you move back.

Are you sure of your domicile status? Do you know which taxes might apply? How does this relate to income which may well have accrued over a lifetime? Does capital gains tax apply? Are you aware of probate fees? These are all key issues that should be considered.

There are strategies that non-UK residents can adopt before returning to the UK that we are happy to discuss with you, but first you need to establish your UK Domicile status.

With a clean bill of health, this could help prevent you or your loved ones from being exposed to an unexpected tax bill which HMRC will come calling for at some stage – most likely in the form of inheritance tax (IHT).

That is where the Foresight UK Domicile Test and UK Tax Health Check by Sterling Trust can help.

For more information please contact David Johnson at Sterling Trust Limited david@sterling.im or by calling 01624 611146