UK non domicile

An important change of direction by the UK HMRC (the UK tax office) has altered how it is possible to establish whether an individual is UK domiciled or not in respect of UK inheritance tax (IHT) issues and liabilities.

HMRC have put out a guidance note saying that from now on it is up to taxpayers themselves to decide whether they need to report chargeable transfers. The onus is now on the client to report if necessary. If the taxpayer is convinced he is not domiciled then he does not need to report. The client has to have good reason for such a belief or he risks the 20% lifetime IHT and fines and other penalties too.

This is important as the HMRC agree that 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 UK inheritance tax.

They go on to say that 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.

Thus there is now an opportunity for those individuals who feel they may have “lost” their UK domicile but who previously had difficulty in obtaining certainty on that matter, to take action which should release them from  the obligation of disclosing  lifetime transfers of property to a discretionary trust.

For detailed information on how one may establish that there is good reason to believe one is non UK domiciled contact your local Sovereign office.

01.04.2010