Pre-deemed domicile planning

Produced by Tolley

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

  • Pre-deemed domicile planning
  • Deemed domicile tests ― overview
  • Income tax and capital gains tax
  • Inheritance tax
  • Tax consequences of becoming deemed domiciled in the UK
  • Liable to UK tax on worldwide income and gains
  • Liable to UK inheritance tax on worldwide assets
  • UK tax liability of settlors of excluded property trusts
  • Tax planning before becoming deemed domiciled
  • Income tax and capital gains tax planning
  • More...

Pre-deemed domicile planning

Individuals should consider whether to undertake any tax planning before becoming UK deemed domiciled for income tax, capital gains tax (CGT) and / or inheritance tax (IHT) purposes.

This guidance note summarises the deemed domicile tests, the impact of becoming deemed domiciled on an individual’s tax position and some general tax planning that may be appropriate depending on the individual’s circumstances.

The tax issues discussed below are complex and the commentary is only intended to be an overview. Specialist advice based on the individual’s circumstances may be necessary.

Deemed domicile tests ― overview

The rules determining whether an individual is deemed domiciled in the UK for income tax / CGT and the rules determining whether an individual is deemed domiciled for IHT are different. This is discussed in detail in the Deemed domicile for income tax and capital gains tax (2017/18 onwards) guidance note, however the rules are summarised below.

The individual’s UK tax residence status is often key to determining whether they are deemed domicile. See the Residence ― overview guidance note.

Income tax and capital gains tax

For income tax and CGT, an individual is treated as deemed domiciled if they meet either Condition A or Condition B:

ConditionsComment
Condition AThe individual (a) was born in the UK, (b) had a UK domicile of origin, and (c) is UK resident in the tax yearTherefore, those with a UK domicile of origin who were not born in the UK can never meet Condition A. Domicile of origin is, usually, dependent on the father’s domicile, and this may not be the same as the individual’s country of birth. See the Domicile guidance note. In order to distinguish between the similar, but slightly different, conditions for IHT deemed domicile, this category of individual is referred to as a returning UK domiciliary
Condition BThe individual has been UK resident for at least 15 out of the previous 20 tax years (unless they were not resident

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