Application of the deemed domicile rules

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Application of the deemed domicile rules
  • Deemed domicile from 6 April 2017
  • Deemed domicile before 6 April 2017
  • Comparison of old and new rules
  • Consequences of becoming deemed domiciled for IHT
  • Transition to the current rules
  • Differences between IHT rules and IT / CGT rules

Deemed domicile from 6 April 2017

A person not otherwise domiciled in the UK under the general law may be deemed to be domiciled for tax purposes. The concept of deemed domicile for income tax (IT) and capital gains tax (CGT) was introduced with effect from 6 April 2017. See the Deemed domicile for income tax and capital gains tax (2017/18 onwards) guidance note in the Personal Tax module (subscription sensitive). At the same time, the long-standing inheritance tax rule for deemed domicile, based on 17 out of 20 years’ residence in the UK, was amended.

F(No 2)A 2017, ss 29–30

There are now three separate rules that can apply deemed domiciled status for inheritance tax purposes, as follows:

  • the person was domiciled in the UK under general law at any point in the last three years
  • the person is a ‘formerly domiciled resident (FDR)’ (see below)
  • the person has been resident in the UK for at least 15 out of the last 20 tax years preceding the current one and for at least one of the four tax years ending with the current one

IHTA 1984, s 267(1); IHTM13024

The first rule attaches a deemed UK domicile to an individual who has left the UK and has taken sufficient steps to lose their UK general law domicile. The deemed domicile continues for three years after the general law domicile has been lost. It should be noted that this three-year period does not refer to tax years. However, the interaction of this rule with the third rule usually means that deemed domicile does, in fact, continue for three tax years.

See Example 1 and the Domicile for UK inheritance tax guidance note.

The second rule was introduced

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