An individual’s domicile is not necessarily his country of birth, or where he is residing at any particular time. It is where he considers his permanent home to be; where he belongs. An individual begins life with a domicile of origin, which is normally his father’s domicile at the time he is born. This could be changed to a domicile of dependence if his father changes his domicile whilst the individual is under the age of 16. Lastly an individual can obtain a domicile of choice by permanently moving to another territory. Where the child’s parents are not married at the time of his birth or if the father has died prior to the birth, then the child takes the mother’s domicile at the time he is born.
Individuals who are not domiciled in the UK do not need to pay tax on income, or gains arising outside the UK unless the income, or gains are remitted to the UK. To benefit from this treatment the individual has to complete the “Non-residence” pages of his tax return to claim his non-domicile status and also make a claim for the remittance basis to apply to his overseas income and gains. If the remittance basis is not being claimed for a particular year, then the tax return guidance notes state that the Domicile questions on the Residence pages should not be completed for that year.
There is no procedure to agree domicile status with HMRC, and the view of HMRC is that under self-assessment it is up to the individual to decide where he is domiciled. This can be tested by HMRC if they open an enquiry into that aspect of the individual’s tax return.
An annual charge may be payable by individuals who are considered to be longer term residents in the UK, and this is discussed under the heading “Annual Remittance Basis Charge”. An individual may choose whether or not to claim the remittance basis each year.
Since 6 April 2017 an individual who has been resident in the UK for more than 15 out of the past 20 tax years is treated as deemed domiciled in the UK for all tax purposes, and is no longer entitled to claim the remittance basis and is taxed on his worldwide income and gains on the arising basis.
On 6 April 2017 a further change to the rules was also introduced so that any individual born in the UK with a UK domicile of origin who acquired a domicile of choice outside the UK and subsequently returns to the UK is deemed domiciled in the UK. For individuals who had returned to the UK before 6 April 2017 the deemed domicile status applies from 6 April 2017. Those who return to the UK after 6 April 2017 are deemed domiciled in the UK from the date of arrival. For IHT purposes a period of grace of 1 year is allowed provided the individual has not been resident in the UK for either of the 2 years prior to the year in question.
Minor children are treated in the same way as other individuals, so a non-domiciled minor child may become deemed domiciled in the UK before reaching the age of 18.