The 5 types of Domicile

1. Domicile of Origin

Your first domicile is determined at birth. Regardless of citizenship, domicile is determined as per that of your parents, usually the father. If the parents were not married at the time of the child’s birth, the mother’s domicile would be considered.  For countries that permit dual citizenship like the US, upon birth, the child would be a dual citizen of the UK and US but domiciled in the UK. For other countries, citizenship and domicile would both be of the UK.

2. Domicile of Dependency

For as long as they are legally dependent, the child’s domicile will be based on that of their parent. If the parent’s domicile changes, so does the child’s. This rule applies till the age of 16 years

3. Domicile of choice

After turning 16 years old, a person may apply to change their domicile. The process is not easy. The aim is to prove that the person has abandoned their previous domicile, moved to, and resides in a different place, and intends to live there permanently. Because a long duration of stay in a country does not decide domicile, the intent is the basis of the decision. To determine intent, tax authorities may consider the following:

• The duration you spend in one location compared with another
• Location where your spouse and children are situated;
• Location of your principal residence;
• Place where your driver’s licence was issued;
• Place where your vehicles are registered;
• Place where you maintain your professional licences;
• Place of your voting registration;
• Where the banks you maintain accounts with are located;
• Location of your real property and investments;
• Permanence of your work assignments in a location; and
• Location of your social ties.

4. Deemed Domicile

Over 15 of the preceding 20 years, if a non-domicile has been living in the UK, they are deemed to be UK domiciled for tax reasons.

5. Elected Domicile

If a non-UK domiciled individual marries someone domiciled in the UK, they can elect to be domiciled in the UK. This is usually keeping in mind the UK’s inheritance tax laws.

Domicile and Inheritance Tax

Knowing your domicile is fundamental to financial & tax planning. It dictates your tax liabilities in terms of income tax, capital gains tax, and inheritance tax. Of these, the inheritance tax is chargeable on transfers of assets. An individual domiciled in the UK is charged this tax for assets whether they are in the UK or abroad. For someone who is domiciled outside of the UK, inheritance tax liabilities are restricted to UK assets alone.

In some cases, this tax may be levied on asset transfers to a non-domiciled civil partner. Interestingly, someone considered UK domiciled for inheritance tax may not be so considered for income or capital gains tax. They will be deemed UK domiciled if they were domiciled three years before the asset was transferred. 

If you would like to understand this more, watch our latest inheritance tax webinar.

Figuring out domicile and related tax obligations can be challenging. We would always recommend speaking with qualified and trained tax specialists. Our tax advisers at Hoxton Capital Management are here to assist you. Contact us to arrange an appointment with a tax specialist.