Domicile is the determining factor in assessing a client’s inheritance tax liability and individuals domiciled in the UK are liable to IHT in respect of their worldwide assets.
However, those domiciled elsewhere are liable to IHT only in respect of assets situated in the UK. Standard Life head of estate planning Julie Hutchison says a common issue which often gets lost in the general conversation about domicile is the 17-year rule.
She says: “Once you have been in the UK for17 years, the Revenue deems you as UK domiciled for inheritance tax purposes. But this only applies to IHT so for other general law purposes you might still be domiciled in the country you came from.”
Hutchison says advisers with British expatriates are often unaware of the continuing estate planning strategies required to mitigate tax liabilities under current domicile rules.
She says: “So much of the focus of discussion around domicile with independent advisers is on inheritance tax but it gets forgotten that your client might remain domiciled elsewhere for other purposes. This should be flagged to make sure advisers don’t say anything to their clients which might be misleading.”