- Individual Tax
- US Tax Overview
- UK Tax Overview
What is Domicile?
The taxation of overseas income and gains may vary for a UK non-domiciled individual.
An individual is generally domiciled in the country in which they have a ‘settled intention to reside’. In simple terms, an individual is domiciled in the country in which they have their permanent home, and this will determine their domicile tax.
There are three separate types of domicile – domicile of origin, domicile of dependency and domicile of choice.
Domicile of origin
An individual normally acquires a domicile of origin from their father when they are born. This is not necessarily the country in which the individual is born. Domicile of origin usually follows the father, but it can follow the mother or other legally appointed guardian.
Domicile of dependency
A child will have a domicile of dependency until he or she is legally capable of changing it. A person has a legal capacity to change their domicile on reaching the age of 16. Until then, if the parent or guardian changes his or her domicile status, the domicile status of the child will change with them.
Domicile of choice
This is a slightly misleading term as it seems to imply that taxpayers can change their domicile at a whim. However, a taxpayer can merely change his personal circumstances in such a way as to leave HMRC to conclude that he is no longer domiciled in the UK.
To lose a domicile of origin in the UK and establish a domicile somewhere else, the individual must leave the UK and settle permanently or indefinitely in another country. To lose a UK domicile, the individual must sever sufficient ties with the UK and the taxpayer must demonstrate a settled intention to reside permanently in another country.
Whether ‘dom’ or ‘non-dom’, it’s all in the balance
There are no single criteria which determine whether an individual is domiciled in the UK. Instead a ‘balance of probabilities’ approach is taken. The same is true in considering whether an individual has acquired a domicile of choice in the UK, as well. Long-term residence in the UK could be an indicator that the individual is UK domiciled.
Keeping up with the changes in domicile tax
Significant changes have been introduced to individuals claiming UK non-dom status as of 6th April 2017, so it is important to review both regulatory changes as well as individual status regularly. This affects domicile status for income tax, capital gains and inheritance tax (IHT). Read more about non-domiciled status.
Did you Know?
Fact SevenThanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
Fact SixThe IRS is actively looking for non compliant US persons.
Fact FiveIt takes an average of 16 hours to do IRS Form 1040.
Fact FourThere are over 500 IRS tax forms.
Fact ThreeSince 1916, illegal income has been taxable.
Fact TwoUS persons must file tax returns no matter where they live and work.
Text One7 million Americans abroad
only 500,000 compliant