by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
web sites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
Expat Investor : October 2008
FIRST PERSON Back to basics on a UK domicile Rachael Holland, Head of Product Law and Financial Planning, Skandia International, explains the detail in domicile status. during life and on death in excess of a nil-rate band (currently £312,000 for the tax year beginning 6 April 2008). How does an individual’s domicile determine the extent to which their estate will be subject to UK IHT? The general position is as follows: ? for UK domiciles – IHT applies to property situated both in the UK and worldwide. ? for non-UK domiciles – IHT applies to property situated in the UK only. Where both spouses or civil partners* are UK domiciled, or where the individual making the transfer of value is non-UK domiciled but the spouse or civil partner is UK domiciled, a transfer between spouses or civil partners is exempt. However, if the individual making the transfer of value is domiciled in the UK but the spouse or civil partner is not, the exemption is limited to a total value of £55,000 once, that is, during life or on death but not both. This exemption is available in addition to the nil-rate band amount. (*As defined by the Civil Partnership Act 2004.) How is a person’s estate calculated for IHT purposes? If you are domiciled in the UK, IHT will apply to your property wherever it is situated in the world. If you are domiciled outside the UK then the tax will only apply to your property (for example, stocks, shares, yacht, real estate) located in the UK. A person’s estate includes the total Understanding domicile is essential for any UK expats living abroad. A person’s country of domicile has significant implications in terms of an individual's liability to a range of UK tax, from income tax to capital gains tax (CGT). A person’s country of domicile will also determine the amount of inheritance tax (IHT) they will pay in the future and could influence how their estate is taxed on death. This article focuses on the general concepts surrounding domicile and UK inheritance tax. It is likely that British expats living abroad are considered domicile in the UK, even if they are not current residents. What is domicile? Domicile is a concept of general law and is distinct from nationality or residence. Whilst it is possible to be resident in more than one 24 EXPAT INVESTOR ? country, it is not possible to be domiciled in more than one country. Generally speaking, this means that a person will be domiciled in the country in which they have their permanent home. What is domicile of origin? The domicile of origin is acquired at birth, and is normally that of the father. If the domicile of the father changes, the child’s domicile will change in place of their domicile of origin, known as domicile of dependency. The domicile of origin can differ from the country of birth, as it follows the domicile of the relevant parent. Under the general law, you will retain your ‘domicile of origin’ until either a ‘domicile of dependency’ or a ‘domicile of choice’ is acquired. October 2008 Who can change their domicile? From 1 January 1974, any person in England,Wales or Northern Ireland who is married or over the age of 16 years is capable of acquiring an independent domicile – a domicile of choice. What is domicile of choice? An individual can try to acquire a new domicile (a domicile of choice) by settling in a new country with the intention of living there permanently. How is a domicile of choice acquired? There are no fixed rules as to what is required to acquire a new domicile and the burden falls on the individual to prove they have acquired a new domicile. Living in another country for a long time and disposing of assets in the country in expatinvestor.com which you were previously domiciled may help, but does not prove a new domicile has been acquired.HM Revenue & Customs (HMRC) makes a judgement after reviewing the ties with the domicile of origin and those with the domicile of choice. It is unlikely that a domicile of choice will be acquired if there are still ties (other than insignificant ones) with your domicile of origin. An objective intention to remain in a new country needs to be proved by actions such as: ? establishing a permanent home in the new country ? gaining citizenship or nationality in the new country ? establishing a business or getting a job there ? having children educated there. What is inheritance tax (IHT)? IHT is a cumulative tax payable in the UK. It applies to transfers made of: ? everything owned in their name ? their share of everything owned jointly ? assets (which include both immoveable and moveable property) held in trust from which he/she gets some personal benefit ? gifts from which he/she keeps back some benefit (gift with reservation). Issues of domicile can be complicated and there are a number of opportunities surrounding domicility. Seeking advice from a financial adviser will ensure that you take the best advantage of this area of financial planning and that you make the most of your domicile status. To find out more about Skandia International enquire through the fast facts number below. Fast Facts 88470