Domicile and Inheritance Tax

UK British Expats Hong Kong

This Revenue & Customs Brief details changes to the circumstances in which HM Revenue & Customs (HMRC) will consider an individual’s domicile and decide whether to make a determination of Inheritance Tax based on that. These changes are being made because in HMRC experience the existing guidelines were not working well for the customer and HMRC. In future, by adopting a wider risk-based approach HMRC will ensure that resources are deployed in the most cost effective way.

In future HMRC will consider opening an enquiry where domicile could be an issue, or making a determination of Inheritance Tax in such cases, only where there is a significant risk of loss of UK tax.

The significance of the risk will be assessed by HMRC using a wide range of factors. The factors will depend very much on the individual case but will include, for example:

  • A review of the information available to HMRC about the individual on HMRC databases.
  • Whether there is a significant amount of tax (all taxes and duties not just Inheritance Tax) at risk.

HMRC does not consider it appropriate to state an amount of tax that would be considered significant, as the amount of tax at stake is only one factor. . At present that limit is £10,000.”

Appendix A: Extract from Revenue & Customs Brief 17/09 superseded by Revenue & Customs Brief 34/2010 issued on 24 August 2010.

“Where an individual who is not domiciled in the UK settles non-UK assets into a non-UK resident trust then assets in that trust will not be subject to Inheritance Tax. Following the release of the new HMRC guidance on domicile most settlors should now be able to decide for themselves whether or not they are UK domiciled.”

“An individual setting up a non-resident trust who, having taken account of the new HMRC guidance, considers they are non-UK domiciled is not obliged to submit an Inheritance Tax account to HMRC. If the settlor is non-UK domiciled then no Inheritance Tax is due. But if an Inheritance Tax account is submitted in these circumstances, HMRC will continue its existing practice and only open an enquiry into that return if the amounts of Inheritance Tax at stake make such an enquiry cost effective to carry out. At present that limit is £10,000.” Note also that you cannot simply abandon a domicile of origin.

 Example:

Robert has a domicile of origin in Jamaica.  One day he leaves Jamaica saying that he will never return. He then spends his time between Scotland and England without making a clear choice for the future. His domicile is still Jamaica. He can only change that domicile by moving to and settling in a new country permanently, i.e. by adopting a domicile of choice.

UK Inheritance Tax (IHT) Planning For UK British Expats Hong Kong

UK Inheritance Tax (IHT) Planning For UK British Expats Hong Kong

Domicile and Inheritance Tax

UK British Expats Hong Kong

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