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Tightening up of deemed domicile rules
A document published by the Revenue recently has confirmed that changes will be made to the deemed domicile rules for income, capital gains tax and inheritance tax purposes from April 2017.For inheritance tax purposes, an individual’s worldwide estate, rather than just any UK assets, may be chargeable to inheritance tax if they are domiciled or deemed to be domiciled in the UK. The concept of domicile is rather a nebulous one but, broadly, it relates to where someone is from. At birth, each individual gains a domicile of origin, but this may be displaced later in life depending on their circumstances.
Even though someone may strictly be domiciled abroad, the UK Revenue will consider them to be chargeable to inheritance tax on their worldwide assets if they are deemed domiciled in the UK on death. At present, this requires the taxpayer to be resident in the UK for at least the last 17 out of 20 years, but the government will reduce this to 15 out of 20 from 2017.
If you were born in the UK to UK parents and have never lived abroad, these changes are likely to have little, if any, effect on you. In a world of increasing globalisation, though, fewer and fewer individuals will fit this case. If you recognise yourself here, you should be aware of the deemed domicile rules to avoid an unexpected and unwelcome extra inheritance tax liability on your death.
Whether you are looking for ways to protect your own assets for the next generation or to make arrangements for how your finances are to be looked after if you could not deal with them yourself, our expert team can advise you on the options available for you and your family.