Domicile overview

By Tolley in association with Tim Humphries of Menzies LLP
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The following Employment Tax guidance note by Tolley in association with Tim Humphries of Menzies LLP provides comprehensive and up to date tax information covering:

  • Domicile overview
  • Introduction
  • Domicile of origin
  • Domicile of dependency
  • Domicile of choice
  • Claiming to be non-domiciled
  • Employment in the UK
  • Employment outside the UK

Introduction

The concept of domicile is fundamental in determining an individual’s liability to tax on their earnings. Following the abolition of the concept of ordinary residence for tax purposes, a person’s domicile status also determines whether a claim can be made for the remittance basis of taxation and overseas workday relief.

Claiming the remittance basis of taxation and overseas workday relief allows a UK resident, but non-UK domiciled employee, to only pay tax on their UK earnings and any overseas earnings brought to the UK for the first three years after they arrive in the UK. If the employer is based overseas and the employee works wholly outside the UK, then a non-UK domiciled employee will just be taxed on the earnings they bring to the UK in any tax year in which they claim the remittance basis of taxation.

The concept of domicile is based upon where a person ‘belongs’. Normally, someone takes the domicile of their father at birth. Nationality, citizenship and the individual’s residence status are separate concepts to domicile but these factors are also considered. In addition, there are other factors which can affect domicile such as the country where they are born, permanently live, have family or business ties to. The intentions of the individual are also very important if they want to change their domicile. There are three basic types of domicile which are explained below.

It is possible that the country in which a person claims to be domiciled did not exist when they were actually born. HMRC guidance on domicile at RDRM20060 confirms that any new territories should be regarded as having existed for the purposes of ascertaining domicile prior to their creation. For example, this principle has commonly been applied in the past in considering the 1921 division of Ireland into its present parts. When determining the domicile of those born in

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