Wills & Tax Planning
In simple terms, the concept of “domicile” may be defined as meaning a person’s fixed and permanent legal home,where they intend to spend the remainder of their life. It must be distinguished from the terms residence,nationality and citizenship. Where the concept of domicile connects a person with a legal system it is important in regulating the succession of assets on the person’s death and the liability to payment of UK Inheritance Tax (IHT).
Under English law no person can be without a domicile or have more than one domicile at the same time.
Each person has a “domicile of origin” which is the domicile assigned to him or her at birth
Legitimate children take the domicile of their father and illegitimate children that of their mother. This “domicile of origin” continues until the person acquires a “domicile of choice” by substantially breaking their links with the domicile of origin and going to live in a different state or country with the intention of remaining there permanently. When the domicile of choice is abandoned the domicile of origin automatically revives.
A dependent person (e.g. a minor) has a “domicile of dependency” based on that of his or her parent or guardian
On her marriage prior to 1 January 1974, a woman automatically acquired the domicile of her husband, although this is no longer the case for marriages on or after 1 January 1974.
For Inheritance Tax purposes, a person can be ‘deemed’ domiciled in the UK
If you have been resident for 17 out of the last 20 tax years, then regardless of your actual domicile, you will be deemed domiciled in the UK and liable to UK IHT on your worldwide assets. If you are domiciled in the UK, and leave, you are deemed domiciled for the three years after leaving.
A person who dies domiciled (or who is deemed domiciled) in the UK is liable to IHT on his or her worldwide assets, subject to any exemptions and reliefs and double taxation treaties which may apply
A person who dies domiciled outside the UK is only liable to IHT on those of his or her assets in the UK which are subject to inheritance tax (certain British Government Securities are exempt from IHT if they are owned by a person not domiciled nor ordinarily resident in the UK).
The above is a simplified explanation and is not intended to be comprehensive or to provide any specific legal advice and should not be relied upon as doing so. For detailed advice about your own specific legal and tax position, as well as ensuring that you have suitable will(s) in place to deal with the succession of your estate following your death you should seek specialist legal advice.