Residence and Domicile

Question 1

What is domicile?

Answer 1

This is a legal status and it is effectively the country that is someone’s natural home. For many the domicile is the country that they are born in and this may never change during the lifetime
It is more long term than residence
Can only have one domicile at one time

Question 2

Where should someone determine and declare their residence and domicile status?

Answer 2

On their self -assessment

Question 3

What are the three stages/names of the statutory residence test?

Answer 3

• Automatic overseas tests
• Automatic UK tests
• Sufficient ties tests

Question 4

What is the automatic overseas test as part of the residency test? (4)

Answer 4

This is the first test that you complete and if any of these criteria apply to that person then the individual is not resident and no further tests are required

• Spend less than 16 days in the UK in the current tax year
• Not UK resident in any of the previous 3 tax years and spend less than 46 days in the UK in the current tax year
• Work full time overseas in the current tax year and spend less than 91 days in the UK of which fewer than 31 days are working days
• Die having spent less than 46 days in the UK in the current tax year and they have not been UK resident in the last 2 tax years

Question 5

What is the Automatic UK test? (3)

Answer 5

An individual is automatically a UK resident if they:-

• Spend 183 days or more in the tax year in the UK
• Have a home in the UK for at least 91 days in which they are present for a minimum of 30 days in the tax year
• They carry out full time work in the UK for a period of 365 days or more, at least part of which falls in the current year

Question 6

What are the sufficient ties test? (5)

Answer 6

The following are considered as ties to the UK:-

• Having a spouse/civil partner/minor child resident in the UK.
• Having accommodation in the UK, available to the individual for a continuous period of at least 91 days
• Working in the UK for at least 40 days in the tax year
• Spending more than 90 days in the UK in either or both of the previous tax years
• Spending more days in the UK than in any other country

Question 7

With the sufficient ties test - when would an individual be classed as UK resident?

Answer 7

If they have sufficient ties depending on their previous residence status and the number of days spent in the UK in the current tax year

Question 8

What is the deeming rule in respect to residency tests?

Answer 8

The deeming rule is where all the following criteria is met by someone after the first 30 qualifying days, then the subsequent qualifying days are treated as days of presence:-

• Have at least 3 UK ties in the tax year
• Have been present in the UK on more than 30 days
• Have been UK resident in one or more of the preceding three tax years

Question 9

How do you acquire domicile? (3 ways)

Answer 9

• domicile of origin
• Domicile of dependency
• Domicile of choice

Question 10

What is domicile of origin

Answer 10

Acquired at birth
Will be father’s domicile if the parents are married at the time of the birth
It would be the mothers domicile if they are not married (or if the mother has been widowed before the birth)

Question 11

What is domicile of dependency?

Answer 11

Someone under 16 will take the domicile of their parent as a domicile of dependency
Before 1st Jan 1974 a woman when she married took her husbands domicile, however after 1st Jan 1974 a married woman’s domicile will be established in the same way

Question 12

What is domicile of choice?

Answer 12

When someone over 16 moves to another country and displays a clear intention to make a home there,

Question 13

What are the standard of proofs that would need to be present to change a domicile? (8)

Answer 13

*Purchasing a property there
*Cutting links with the UK (eg selling UK property, UK accounts)
*Setting up a business/becoming employed in the new country
*Marry, starting a family there
*Acquiring new nationality/citizenship
*Making a will under that country’s laws
*Being on the electoral register in the new country
*Arranging to be buried there
(There needs to be an indication of intent)

Question 14

What are the timescales that a non domiciled person who is married to a UK domiciled spouse to elect to be treated as a UK domiciled for IHT purposes?

Answer 14

This can be any time when the spouse is alive and if they die within 2 years from their death

Question 15

What is the rule on the timescales regarding deemed domiciled?

Answer 15

You are deemed domiciled if you have lived in the UK for 17 or more of the last 20 years

Question 16

What are taxation rules on someone is UK domicile and UK resident ( on income tax, CGT and IHT)?

Answer 16

Income tax - chargeable on worldwide earned and investment income, whether remitted into the UK or not
CGT - chargeable on worldwide gains
Inheritance tax - chargeable on worldwide gains

Question 17

What are the taxation rules for someone who is UK domicile but not UK resident? (on income tax, CGT and IHT)

Answer 17

Income tax - chargeable on UK earned income but not on overseas earned income
CGT - generally no liability unless the person is temporarily non-resident. And if they dispose of UK property since 5th April 2016 then they are charged CGT

Question 18

What is meant by the term “temporary non residence”?

Answer 18

Refers to a period of non residence between 2 periods of residence
Stops people who are UK resident from leaving the UK for a period of time and becoming non resident and therefore trying to avoid CGT on a forthcoming disposal.

Question 19

What are the three rules that class an individual as non-resident?

Answer 19

• Were resident in the UK for any part or at least four out of seven tax years before the year of departure
• Became non resident for 5 years or less
• then they can resume UK residence

Question 20

What is the taxation position is someone who is UK resident and not UK domicile in respect to income tax and CGT?

Answer 20

Income arising in the UK is subject to income tax
Disposals of UK assets are subject to CGT
Income arising overseas will be subject to UK tax unless the remittance basis is claimed

Question 21

What is the remittance basis? (9)

Answer 21

An individual that is UK resident and non UK domicile can claim the remittance basis
Choose to be taxed on overseas income and CGT outside the UK
This means that any income or gains will only be subject to UK tax if brought into the UK
If someone chooses the remittance basis then they do not have a personal allowance for both income and CGT in that tax year
This allowance can not be transferred to a spouse
Annual tax charge of £30000 for adults who have been resident for at least 7 out of 9 years
Annual tax charge of £60000 where the individual has been resident for at least 12 out of 14 years
Annual tax charge of £90000 where the individual has been resident for at least 17 out of 20 years

Question 22

Who does not have to pay the remittance charge?

Answer 22

Anyone under 18 or where income or gains are less than £2000. They can use the allowances on this

Question 23

What is double taxation relief?

Answer 23

The UK has entered into arrangements with many other countries to stop double taxation. This means that some income is only taxed in one of the countries. Where double tax is paid and an agreement is in place, then a tax credit is given to reclaim against the UK tax.
There is often a clause between the countries where information is exchanged and then prevents tax evasion.