The Phoenix that is Domicile of Origin
  • 3 Nov 2023

Nadine has been advising on complex tax matters for over 25 years.

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The Phoenix that is Domicile of Origin

This short blog post was triggered by a recent conversation I had with a client who hasn’t lived in the UK for decades and yet I had to warn him that there was a risk he was now domiciled in the UK. As people become more internationally mobile, having homes in several countries, there is a misconceived idea that their domicile of choice ‘can be any of them’, when in fact it may be none of them.

Domicile is different to residence for tax purposes as it has wider ramifications in general law and many legal cases over the years have established precedence over the steps required to acquire a domicile of choice. A number of these cases are not tax related but can be used by HMRC as evidence of the legal viewpoint in relation to domicile.

When initially permanently leaving the UK, professional advice is often sought in respect of losing a domicile of origin in the UK by obtaining a domicile of choice elsewhere. For those who retain a domicile in the UK, their worldwide estate is subject to UK Inheritance Tax (IHT). With UK IHT at a rate of 40% on death and without any equivalent tax in many other countries, it is understandable that those emigrating take steps to ensure they have acquired a domicile of choice elsewhere and therefore have lost their domicile of origin in the UK.

After following the initial advice, many breathe a sigh of relief when, having left the UK for many years and not being tax resident in the UK at all, believe they are safe from UK IHT. But losing your domicile of origin does not mean it disappears. This is where the Pheonix nature of your domicile of origin can unexpectedly regenerate leaving your loved ones (or yourself in the case of lifetime gifts) facing an unexpected UK IHT bill.

Given that domicile is a general law concept it is not possible to simply not have a domicile. Where a domicile of choice has not been maintained, your domicile of origin rises out of the ashes and with it reinstates your liability to UK IHT.

One of the key cases in this respect is BARLOW CLOWES INTERNATIONAL LTD & ORS V HENWOOD [2008] EWCA CIV 577. This is not a tax case, but domicile was important for the receivers of the company being able to petition Mr Henwood in England & Wales. Mr Henwood had lived outside the UK for several decades initially establishing a domicile of choice in the Isle of Man. Later he moved to Mauritius and had homes in France and Mauritius spending time equally in both countries. This meant he had abandoned his domicile of choice in the Isle of Man and the question was therefore – where was he now domiciled? Although he took steps to establish a domicile of choice in Mauritius, the court found these were without substance and their lives were such that it was not possible to determine by their actions whether they had chosen to permanently reside in France or Mauritius. It was therefore held that for the period in question, he did not have a domicile of choice in either France or Mauritius but instead his domicile of origin reactivated, and he was domiciled in the UK.

For anyone relying on their domicile remaining outside the UK, it is certainly worth having a domicile review regularly and definitely following any change in your homes or residence, even if you have not been tax resident in the UK for many years. I regularly discuss any new homes and moves with my clients to ensure that we have a record of intention and, importantly, the client is aware of what they need to do to demonstrate real commitment to those intentions.