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Old 27.06.2007, 09:11
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Losing UK Domicile?

Anyone got any practical experience of losing one's UK domicile and therefore evading the UK IHT system?

We have been out of the UK going on 10 years, have owned houses here and in France. A flat in London we would sell. Only issue might be that I am non-exec-director of a UK company and trustee of its pension fund.

Daniel
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Old 27.06.2007, 09:15
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Re: Losing UK Domicile?

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Anyone got any practical experience of losing one's UK domicile and therefore evading the UK IHT system?

We have been out of the UK going on 10 years, have owned houses here and in France. A flat in London we would sell. Only issue might be that I am non-exec-director of a UK company and trustee of its pension fund.

Daniel
Are you wanting to avoid Inheritence Tax when you snuff it or on something you might inherit?
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Old 27.06.2007, 09:17
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Re: Losing UK Domicile?

When I die. Having turned a ripe old age of 40, my thoughts are now turning to the inevitable (albeit no immediate plans)!! Dont really want to stuff new PM G. Brown's coffers any more than necessary. D
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Old 27.06.2007, 09:20
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Re: Losing UK Domicile?

I'm suspecting that domicile (or lack of it) will not get you out of IHT when you pop your clogs and a UK-based property is sold. Too much of a loophole, dontcha think?
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Old 27.06.2007, 09:30
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Re: Losing UK Domicile?

UK IHT applies to all UK domiciled folks. A UK domicile of origin (ie basically if your father was born in UK!) is therefore much harder to lose than residence, but it is possible if you can show you have "permanently severed your links to the UK"

If your domicile of choice becomes say CH, canton SZ, as you know there is not IHT in SZ.... I think the challenge is that you cant get a certificate from HMRC to prove this.

See http://www.taxationweb.co.uk/guides/...d_domicile.php for a bit more detail.

I was wondering if anyone out there had practical experience of this.

Daniel

Last edited by dannyt986; 27.06.2007 at 09:39. Reason: Typo/Correction
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Old 27.06.2007, 10:02
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Re: Losing UK Domicile?

The key thing is you said you will sell your UK property. If you also close UK bank accounts etc then there will be no estate to be administered in the UK?

The tax is paid by the estate administrator(s) and as there won't be an estate I don't see how you could get caught for IHT.

There is an other way though - one that I intend using. Don't have anything left when you snuff it. If I pop my clogs while I still have a wedge I will have failed in my life plan .
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Old 27.06.2007, 10:25
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Re: Losing UK Domicile?

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We have been out of the UK going on 10 years, have owned houses here and in France. A flat in London we would sell. Only issue might be that I am non-exec-director of a UK company and trustee of its pension fund.

Daniel
My UK adviser has told me that I must go back to the UK for a minimum of 3 months. I must change my residency back to the UK and live in my London house. (Evidence that I am paying utilities and property (Poll)tax.) After 3 months I can sell it and not get CGT levied on it because it will be my primary residence. Then I can go back to wherever I came from (or where I choose to retire) and transfer the cash either as a whole or as and when needed. However this also has implications if you want to become a Swiss citizen and relinquish all ties with the UK. I suggest that you find a good tax adviser both here and in the UK.
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Old 27.06.2007, 10:40
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Re: Losing UK Domicile?

Slightly unrelated but if you are a British citizen then can you loose your British citizenship as a result of permanently living outside UK for 20-30 years?
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Old 27.06.2007, 10:51
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Re: Losing UK Domicile?

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Slightly unrelated but if you are a British citizen then can you loose your British citizenship as a result of permanently living outside UK for 20-30 years?
The simple answer is No.
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Old 27.06.2007, 10:58
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Re: Losing UK Domicile?

Contact the inland revenue in the UK and they will probably be able to send you the regulations regarding residence/domicile. When I left 18 years ago I seem to recall that they accept you have left when you had been gone for 3 years and did not own a property. I still have a UK company and this is subject to UK corporation tax but my shares in that company would not be subject to IHT as I am neither resident or domiciled there. You can still keep a bank account going in the UK. I receive the UK state pension and a private one without UK tax deduction.

See also this thread which started today.
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Old 27.06.2007, 11:32
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Re: Losing UK Domicile?

Another point Iíve just remembered - Inheritance tax.
I am from the UK but my wife is Swiss. Although I am resident and domiciled here I still had the option of making a will and specifying that it was to be dealt with in accordance with UK law. This does not make it subject to UK IHT but does give me the option of avoiding Swiss inheritance rules which specify certain rights for children etc.

My wife, being Swiss, did not have this option and as we both have children from our previous marriages this made things very complicated. We consulted a lawyer and found that there was a simple way around this called (in French) a Pacte Successoral.
Our children (1 Swiss and 2 Brits) signed away their rights under Swiss law and agreed to accept our wills in its place.

You should certainly consult a Swiss lawyer about inheritance.
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Old 27.06.2007, 12:42
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Re: Losing UK Domicile?

It is very difficult to lose domicile. I remember spending quite a bit of time learning this when I was doing my ACA exams.

Yes, you have to sever ALL ties with the UK. I think 10 years is cutoff used, and also I think you would probably have to be a citizen of a country other than the uK. A good thing they always seem to go on is where you bought a burial site. If in the UK then you will still be considered domiciled there.

I remember a story when I was training (apparently true, but cant prove it).
A man left the UK and moved abroad for about 20 years. He did everything to sever ties with the UK.Burial sites in his new country, sold everything, and had absolutly nothing left in the UK. When he died, the IR wanted their 40% so the whole thing went to court. The IR won, as before the man died he wrote a postcard to someone in the UK saying "The UK will always feel like my home" or something like that, and so they won..
At the end of the day the IR want your cash, so they will go to quite a few lenghts to prove that you are domiciled in the UK.
Note also that there is no IT between spouse transfers.
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Old 27.06.2007, 18:39
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Re: Losing UK Domicile?

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My wife, being Swiss, did not have this option and as we both have children from our previous marriages this made things very complicated. We consulted a lawyer and found that there was a simple way around this called (in French) a Pacte Successoral.
Our children (1 Swiss and 2 Brits) signed away their rights under Swiss law and agreed to accept our wills in its place.
Did they see the wills first?
*just curious*
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Old 27.06.2007, 19:15
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Re: Losing UK Domicile?

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Did they see the wills first?
*just curious*
Yes, although this was not a condition of the arrangement. Because of the Swiss inheritance law it could have caused an unfair result if we had not done this.
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Old 27.06.2007, 23:17
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Re: Losing UK Domicile?

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It is very difficult to lose domicile. I remember spending quite a bit of time learning this when I was doing my ACA exams.

Yes, you have to sever ALL ties with the UK. I think 10 years is cutoff used, and also I think you would probably have to be a citizen of a country other than the uK. A good thing they always seem to go on is where you bought a burial site. If in the UK then you will still be considered domiciled there.

I remember a story when I was training (apparently true, but cant prove it).
A man left the UK and moved abroad for about 20 years. He did everything to sever ties with the UK.Burial sites in his new country, sold everything, and had absolutly nothing left in the UK. When he died, the IR wanted their 40% so the whole thing went to court. The IR won, as before the man died he wrote a postcard to someone in the UK saying "The UK will always feel like my home" or something like that, and so they won..
At the end of the day the IR want your cash, so they will go to quite a few lenghts to prove that you are domiciled in the UK.
Note also that there is no IT between spouse transfers.
I think that you will find that this information is completely wrong. You will find a full explanation of residence and domicile here. You do not have to take the nationality of another country to be resident and domiciled abroad.
Sorry, but the story you mention just does not add up. If the man was abroad for 20 years and had no UK assets then the IR would not have known that he had died as his death would not be registered in the UK. Even if they did, they could only take action against the executors of his UK will and, obviously, there were none. Have a look at the link Iíve given you and this should clarify things.
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Old 27.06.2007, 23:47
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Re: Losing UK Domicile?

I lived outside of the UK for 34 years before I even applied for my first ever British Passport. No, I think you have to be outside of the UK for about three generations before you lose you citizenship.
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Old 28.06.2007, 09:06
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Re: Losing UK Domicile?

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I think that you will find that this information is completely wrong. You will find a full explanation of residence and domicile here. You do not have to take the nationality of another country to be resident and domiciled abroad.
Sorry, but the story you mention just does not add up. If the man was abroad for 20 years and had no UK assets then the IR would not have known that he had died as his death would not be registered in the UK. Even if they did, they could only take action against the executors of his UK will and, obviously, there were none. Have a look at the link Iíve given you and this should clarify things.
Well, your website states that:
Living in another country is not conclusive evidence of an intention to change domicile.
So personally I would not leave it by chance and someone has to fight the tax authorities when I am dead. I would try and get citizenship of the country I live in, saving a lot of work later. As for the man with 20 years, I don't have the full story however the death would have had to be registered with a UK consulate/embassy if the man only had British citizenship.
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Old 28.06.2007, 13:39
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Re: Losing UK Domicile?

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Well, your website states that:
Living in another country is not conclusive evidence of an intention to change domicile.
So personally I would not leave it by chance and someone has to fight the tax authorities when I am dead. I would try and get citizenship of the country I live in, saving a lot of work later. As for the man with 20 years, I don't have the full story however the death would have had to be registered with a UK consulate/embassy if the man only had British citizenship.
Youíve only quoted one sentence and, obviously, you have to take into account everything else.

If a UK national takes the nationality of another country it does not mean that they lose their UK nationality but they simply have two.

I donít understand how, once domicile and residence has been established outside the UK and there are no UK assets, just how the IR could pursue a case in the UK courts ? Can you expand on this ?
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Old 28.06.2007, 15:31
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Re: Losing UK Domicile?

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Youíve only quoted one sentence and, obviously, you have to take into account everything else.

If a UK national takes the nationality of another country it does not mean that they lose their UK nationality but they simply have two.

I donít understand how, once domicile and residence has been established outside the UK and there are no UK assets, just how the IR could pursue a case in the UK courts ? Can you expand on this ?
Umph, I was only giving advice to the original poster on how to lose domicile, which are things I learned when I worked in the taxation department of a firm of accountants, not to have a taxation argument.

The key is the establishing that domicile really is outside the UK. The key is to sever all ties with the UK, and nevÍr having the intention of returning. There are cases where there were individuals that lived in the UK for 30/40 years (not originally from the UK) but when they died, the courts decided that they were not UK domiciled as they never had the intention to stay in the UK forever, and they always had the intention of returning to their own countries. Hence my thing with the postcard. The man lived abroad for for 20 years, cut all assets in the UK, but the postcards (and I am assuming some other factors similar) showed that although he had moved, he would, had he lived, come back to the UK (maybe, maybe not, but the man is dead, so can't go and ask him). So my thing with the citizenship could argue that if you ONLY had UK citizenship then the IR (or what it is called now) could say that you had intention of coming back, but you never got a chance before you died. These are people that have millions in the bank, so clearly the IR is very interested in pursuing this as 40% of millions is a lot of money for them. If the ordinary man died, they might not be so bothered and not pursue it.
At the end of the day it is up to the courts to decide.
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Old 28.06.2007, 16:09
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Re: Losing UK Domicile?

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Umph, I was only giving advice to the original poster on how to lose domicile, which are things I learned when I worked in the taxation department of a firm of accountants, not to have a taxation argument.

The key is the establishing that domicile really is outside the UK. The key is to sever all ties with the UK, and nevÍr having the intention of returning. There are cases where there were individuals that lived in the UK for 30/40 years (not originally from the UK) but when they died, the courts decided that they were not UK domiciled as they never had the intention to stay in the UK forever, and they always had the intention of returning to their own countries. Hence my thing with the postcard. The man lived abroad for for 20 years, cut all assets in the UK, but the postcards (and I am assuming some other factors similar) showed that although he had moved, he would, had he lived, come back to the UK (maybe, maybe not, but the man is dead, so can't go and ask him). So my thing with the citizenship could argue that if you ONLY had UK citizenship then the IR (or what it is called now) could say that you had intention of coming back, but you never got a chance before you died. These are people that have millions in the bank, so clearly the IR is very interested in pursuing this as 40% of millions is a lot of money for them. If the ordinary man died, they might not be so bothered and not pursue it.
At the end of the day it is up to the courts to decide.
To repeat my question:
I donít understand how, once domicile and residence has been established outside the UK and there are no UK assets, just how the IR could pursue a case in the UK courts ? Can you expand on this ?
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