What does 'domicile' mean and how does it affect me?
Domicile is a general legal term which can essentially be defined as 'the country you consider your permanent home'. Determining domicile status, however, can be complex. In fact, HMRC guidance states that domicile cannot be defined precisely, but the concept rests on various basic principles:
Every individual must have a domicile at all times. The law ascribes a domicile to those individuals it regards as lacking capacity to choose one.
An individual cannot have more than one domicile at the same time for the same purpose.
An existing domicile is presumed to continue until it is proven that a new domicile has been acquired.
Your first domicile, known as a domicile of origin, is based on that of your parents (usually your father). Your domicile will only change if you acquire a new domicile of choice. To do this, you usually have to move to another country and establish a permanent intention to remain there and then prove to HMRC that this is the case.
Although domicile can change, there is generally a presumption in favour of the continuation of an existing domicile. To change a domicile, lots of factors are taken into account for example, the location of family, property and business or investment interests. The complexity of issues that need to be considered are one of the primary reasons that many of these cases end up with the courts having to determine the issue.
It is also possible in certain circumstances for an individual to have two domiciles although this is unusual. There is also a concept in the UK of deemed domicile - under new 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.
How does this affect me?
There can be considerable tax advantages to non-domicile status, particularly if you have large amounts of investment income or property overseas. Given the complexity of the laws surrounding non-dom taxation, it is generally advisable to seek professional assistance to ensure you are in compliance.
At Sterling Beanland, we specialise in tax matters including those associated with residency and domicile. If you would like to arrange a consultation with a specialist, please contact us.