Please see below the latest financial update from Blevins Franks.
Please do not hesitate to contact Paul should you have any questions related to this or other financial matters.
https://www.blevinsfranks.com/determining-and-proving-domicile/ Determining and proving domicile By Paul Montague, Partner, Blevins Franks 928 433 411 | firstname.lastname@example.org | www.blevinsfranks.com Domicile is a very important issue for British expatriates. You remain liable to UK inheritance tax on your worldwide assets for as long as you are domiciled or deemed domiciled in the UK. While it can be possible to change your domicile, it depends on your circumstances and intentions and should be a carefully considered and planned process. 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’, frequently described as the place where you intend to die. You can live in the Canary Islands for many years and remain domiciled in the UK. Domicile and inheritance tax Whether or not your estate will be assessed for UK inheritance tax (IHT) depends on your domicile status (rather than on your tax residence). Anyone who is deemed UK-domiciled is liable to 40% inheritance tax on their worldwide assets. Each individual has a nil rate band of £325,000, plus a £175,000 ‘family home allowance’ if they meet certain conditions. Any balance not used when the first spouse/civil partner dies can be passed to the survivor, potentially giving a couple a combined allowance of up to £1 million, depending on circumstances. Note that while assets passed from one spouse/partner to another on death are generally not liable for IHT, this is only when both are UK domiciles. If one of you is a non-UK domicile, there may be some inheritance tax to pay. If this applies to you are or you are unsure, seek personalised advice. If you die as a non-UK domicile, you will only be liable to UK inheritance tax on assets situated in the UK, and only the value above the two allowances. Note that you may also be liable to inheritance tax in your country of residence, depending on the local tax regime – Spain imposes succession and gift tax, which can be quite high. Types of domicile Domicile of origin – UK common law ascribes a domicile of origin to every individual at birth. It will be the father’s domicile, or the mother’s if she is single, and so not necessarily your country of birth. Domicile of dependence – this applies to women married before 1974 (whose domicile will mirror their husband’s), minors and other legal dependents. Domicile of choice – As the HM Revenue & Customs RDRM22010 explains, “any individual who has legal capacity can acquire a domicile of choice”. Acquiring 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 examine your intentions, to look for indications that you see Britain as your homeland and may return in future, you need to sever as many ties as possible with the UK. Electing for UK succession law to apply over local ‘forced heirship’ rules could also be a tipping point in combination with other ties to the UK. Note that even if you take all the steps to adopt a domicile of choice outside the UK, it can take up to four years to shed a UK domicile for inheritance tax purposes. HMRC may treat you as UK-domiciled if you:
- were UK resident for 15 of the last 20 tax years
- return to Britain for more than a year (if the UK is your domicile of origin and place of birth)
- move to a third country – until you can demonstrate you have established a new domicile of choice.
- Date, place and nationality at birth, parents’ names and marital status, and details of siblings.
- Details of your marriages/civil partnerships, divorce and long-term cohabitation, and information on your children (names, dates of birth, nationalities, place of education, current locations etc).
- List of all residences from birth, details of transfers of property and summary of residences that have been available for your use.
- Information regarding any exercise of political rights in any territory; memberships of professional bodies; membership of clubs, societies, associations etc and level of participation; details of religious, cultural and social connections.
- Ability to speak, read and write the relevant languages.
- Details of any wills and the local law they are governed by; summary of any deeds and declarations, including those relating to dependents, and location of personal papers and items of financial or sentimental value.
- Summary of your professional and personal advisers, their services and location.