One of the key reasons for a possible change to the law of domicile – the subject of my most recent columns – may well be to introduce a greater degree of certainty. Of course, for most clients of financial advisers in the UK, there is no uncertainty – they will be UK-domiciled by virtue of their unchanged domicile of origin being in England, Wales, Scotland or Northern Ireland.
But where there is some uncertainty, most usually for those living in the UK for a long period but who do not have a UK domicile of origin or for those with a UK domicile of origin who have left the UK, some guidance from the Inland Revenue is understandably seen as being helpful.
It should be borne in mind that the Inland Revenue will consider the question of an individual's domicile only where this is relevant in computing a current tax liability. This should be borne in mind carefully for those persons who are contemplating planning on the basis of their current domicile (or perhaps, in the case of non-UK resident individuals, after a change in domicile status) and who require reassurance that the Inland Revenue agrees their domicile status.
In particular, it should be remembered that, when making gifts of capital, a return showing a potentially-exempt transfer will not need to be made at the time of the gift.
In particular, for expatriate investors (to whom UK income and capital gains tax may not be relevant) who are planning on the basis that they have lost their previous UK domicile, it is obviously important that this aspect is clarified with the Inland Revenue before any excluded property trust is established. This may mean that they would need to make a chargeable transfer (not a potentially exempt transfer) and make a suitable return to the Capital Taxes Office before any major planning is implemented.
In all cases, professional advice should obviously be sought in advance.
If an individual wishes to substantiate that he is no longer UK-domiciled, he should seriously consider the following action checklist:
- The individual should ensure that he is able to demonstrate clearly when he will be leaving the UK. This should be on the happening of a definite future event and there should be a real possibility of that event occurring.
- For example, a person should document that, although he is working in the UK, he definitely intends to leave on his retirement or when service terminates.
- The individual should collect as much evidence as possible to substantiate that the foreign country rather than the UK is the country with which he is most closely connected. Each case will depend on its own facts but the following would seem to be important matters:
- Accommodation in the country of foreign domicile is a very helpful factor. It should be available for the individual's use and be furnished and occupied by him some time during each year.
- Passport, identity cards, and so on, for the foreign country should be retained and preferably no UK or other passport sought.
- Nationality of the foreign country should be retained and there should be no attempt to seek UK or other nationality.
- A burial plot in the foreign country should be available.
- Membership of a club or clubs in the foreign country should be retained and UK memberships avoided.
- Bank accounts should be maintained in the foreign country and not in the UK, if possible.
- Credit cards should be issued from an institution in the foreign country with a foreign country address.
- Insurances should be taken out through insurers in the foreign country (subject to the UK tax position).
- Pensions should be in the foreign country if possible.
- A foreign country driving licence (rather than a UK licence) should be used if possible, together with an international licence if required.
- Wills should be made periodically under the law of, and in accordance with, the requirements of he foreign country and English wills should not be made.
- The non-UK domiciliary should register at the foreign country embassy.
- The non-UK domiciliary should join an expert group.
- Votes should be exercised in the foreign country if possible.
- A diary of time spent in the foreign country should be kept.
- A foreign declaration of domicile in that country should be made.
- A documented plan to return to the foreign country should be made.
- Family and other roots in the foreign country should be maintained so as to show where one's home is.
Although these are all helpful factors, this should not be regarded as an exhaustive list. Clearly, this is a highly subjective issue.