Residency & Domicile

If you are considering becoming an ‘expat’ from the UK or are already an ‘expat’ and expecting to return to the UK, we highly recommend you read through our information as detailed below:

When you permanently leave your home country, you can normally expect to leave behind your tax liabilities (although this is certainly not correct for some nationalities) and whilst with proper planning this can be the case for income tax and capital gains tax, which largely depend on your tax residence, sadly liability for inheritance tax (IHT) is another story. 

Whether your estate will be liable for IHT is not based on your residency or nationality; instead it revolves around the less precise concept of your ‘domicile’.

Domicile is different from tax residency and nearly always stays with someone, wherever they go. Therefore, using the UK as an example, if a person has a UK domicile when they die, regardless of where they are living, their worldwide assets will be subject to IHT.

The rules about domicile are among the most difficult in tax law. It’s not just a question of technical complexity, there is a lack of definition and formality in this area that means it is effectively one in which the outcome is subjective.

Unfortunately, for most countries, domicile is not defined in tax legislation and unlike residency, there are no statutory tests. It can be difficult for nationals to lose their domicile and this is why it is often referred to as ‘sticky’ effect of domicile on tax liability and of course as such inheritance taxes.

We offer a unique service in as much that we will use our experience and expertise to run our own tests on your individual circumstances to establish is you are likely to be considered as domiciled in your home country.

This can be complex and to give an example of UK legislation, HMRC manuals, state: “a change of domicile is never to be lightly inferred, particularly a change from a domicile of origin to a domicile of choice, which is regarded by the courts as a serious step requiring clear and unequivocal evidence. the standard of proof in this area is the civil one, on the balance of probabilities, but discharging it requires suitably cogent and convincing evidence.”

A further alarming example of the above refers to the case of actor Richard Burton as it cost his estate £2.4 million in tax when he was judged to have failed the ‘intent test’. 

Although he lived in the USA for 27 years before dying, he had bought burial plots in Wales for himself and his wife, (Elizabeth Taylor) and although he was ultimately buried in Switzerland, the purchase of the unused plots was enough to incur the liability. 

We are committed to our approach and to achieving the outcome you are seeking.

Contact us now so we can organise a free no obligation initial consultation.