Inheritance Tax and domicile
07/08/2019

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong. However, determining domicile status can be complex. HMRC guidance states that domicile cannot be defined precisely, but the concept rests on various basic principles.

Although domicile can change, there is generally a presumption in favour of the continuation of an existing domicile. To change a domicile, many factors are considered, for example, the location of family, property and business interests.

There is also a concept in the UK of deemed domicile whereby under rules introduced from 6 April 2017, any person who has been resident in the UK for more than 15 of the previous 20 years, will be deemed to be domiciled in the UK for tax purposes. This would make them liable to Inheritance Tax (IHT) on their worldwide assets. This was aimed to catch the likes of Roman Abramovich, but what HMRC forgot of course was that the megarich can live wherever they choose, so this move rather backfired when Mr Abramovich left the UK to live in Israel, where presumably, he can have a better arrangement with the local tax authorities!

IHT is generally chargeable to people domiciled (or deemed domiciled) in the UK or with assets sited in the UK. For example, HMRC’s manual states that if someone creates a settlement with assets outside the UK, when they are not domiciled in the UK, the settlement could be excluded from the charge to IHT. There are also many double tax agreements that can, depending on the circumstances change a person's liability to IHT.


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