Domicile – Much Ado About Nothing?

Private: Sangeeta Moore
1 June 2021

Domicile is a common law concept most people do not usually come across until they start putting their affairs in order. Under UK Law, every individual has a domicile and can only have one domicile at any given time.

What is a domicile?

Put simply, your domicile is the country you consider to be your permanent home. This can be your country of birth or a country you move to at a later stage in your life. If you live in your country of birth all your life, you will have a domicile of origin in that country for life.

On the other hand, if you emigrate to another country you may decide to have a new domicile in that country, known as a domicile of choice. It must be stressed though, that a move to another country does not automatically bring about a change to your domicile status. This is because you can be resident in that country but nonetheless retain your domicile of origin.

Why is my domicile status relevant?

Your domicile connects you to the laws of a particular country. Therefore, the laws of your country of domicile will apply to all aspects of your life. For instance, if you are domiciled in England and Wales, you are subject to UK taxes, the main ones being Income Tax, Capital Gains Tax, and Inheritance Tax. This is the case whether you have a domicile of origin or a domicile of choice in England and Wales.

However, if you are resident but non-domiciled in England and Wales you have a couple of options with regard to your taxes.

• You may choose to be taxed in the UK on your overseas income and gains only when these are brought into the UK, known as remittance basis.
• Alternatively, you may choose to be taxed in the UK on all your income and gains, irrespective of where these occur, known as arising basis.

The difference between these two options is significant and you need to seek legal advice before making your choice.

Does my domicile status impact upon my estate?

With respect to Inheritance Tax, English law applies to your estate if you are domiciled in England and Wales. However, your domicile status is not so clear cut where either you left the UK for another country or you moved to the UK from another country.

HMRC is likely to take a special interest in such instances because of the inheritance tax payable if domicile is established to be in the UK. If HMRC takes issue with your domicile status, then the UK Courts will decide where you are domiciled. In coming to its decision, the court will look at various aspects of your life to establish the strength of connection you have to the UK. So, these cases are driven by facts and decided on a case-by-case basis.

Does domicile affect who can inherit from my estate?

Your domicile status has an effect on the rights of succession to your estate. This is particularly of relevance in the event of intestacy and can lead to lengthy and costly disputes over your domicile and therefore your estate.

For instance, under the intestacy rules of Thailand a surviving wife with no children is only entitled to half her deceased husband’s estate, with the other half of the estate passing to the deceased’s blood relatives. On the other hand, under the rules of intestacy in the UK, a surviving wife with no children is entitled to the whole estate. So, with an estate in the UK, a Thai surviving wife would probably want a court decision that her deceased husband was domiciled in England and Wales, whereas the decease’s blood relatives would want the court to find that the deceased was domiciled in Thailand. Such disputes can take considerable time and delay the administration of an estate.

Therefore it is imperative that the issue of domicile is explored during the estate planning stage and you provide as much information as you can about your circumstances. You may feel safer if all relevant documents and events are recorded for future use in the eventuality of a challenge either from HMRC or a potential beneficiary of your estate.

For specialist advice on your domicile status and estate planning, please contact Sangeeta Moore at Spencer West LLP on 020 7925 8080 or by email at [email protected] *International Business and Private Wealth Lawyers