Domicile and IHT

Domicile is an important consideration for British expats who have spent considerable time in a country outside of the UK. For those whose domicile is in the UK, they will be subject to inheritance tax (IHT) on their worldwide assets.

To gain an in-depth understanding of the taxation regulations and guidelines pertaining to domicile and residence, we recommend visiting the Tax Guides section on our website. There, you will find a detailed analysis of these topics, providing comprehensive information on the subject matter.

There have been recent HMRC court cases over an individual’s domicile and UK IHT which make it important for expats living in Hong Kong, Singapore or similar to review their circumstances. Those most likely to be affected by this usually work at large, international companies such as HSBC, Standard Chartered, Barclays UOB, UBS, Singtel etc.

COLLER V HMRC

The recent decision in Coller V HMRC saw another successful challenge by HMRC into a living taxpayer’s domicile.  Whilst an individual’s intentions can affect their domicile, this case highlights the importance of the individual’s actions.  As with the Gulliver v HMRC case in 2017, this case decided that later events should be considered when determining someone’s intention at any given point.

The Coller case involves a taxpayer whose father fled persecution from their homeland in Nazi-occupied Austria to the UK. The father later passed away at the relatively young age of 50. The Tribunal concluded that the taxpayer’s father had acquired a domicile of choice in the UK at the time of the taxpayer’s birth, establishing a UK domicile of origin. Additionally, the Tribunal determined that the taxpayer would have chosen a UK domicile of choice by the relevant date.

TRIBUNAL REVIEW

The Tribunal looked at a number of factors in reaching their conclusion, some of the key takeaways are as follows:

1. Whilst the length of time the taxpayer had been in England was important, the quality of that residence was more important in determining the taxpayer’s intention. This was because the taxpayer was born in England and had established a family in the UK. Furthermore, whilst he had an international lifestyle he had no other homes outside of England.
2. Witness statements were provided by the taxpayer and his mother as evidence for relevant parties’ intentions. However, the tribunal concluded that more weight should be given to the facts and actions of the parties rather than self-serving statements.
3. The Tribunal considered that whilst a domicile of origin is usually hard to displace, this burden is lessened when the individual in question has little to no ties to the place of their domicile of origin.

Historic cases have drawn on the point that long-term employment in another country does not in itself support the obtaining of a domicile of choice outside the UK.  The individual must be able to demonstrate actions taken to make that country their permanent home. This must evidence their intention to remain there indefinitely.

To find out more about these issues and the rules that surround them, please visit our various tax guides on:

Domicile and UK IHT

UK Taxation Basis