Residence and Domicile status of individuals

The residence and domicile status of a taxpayer has a significant effect on the tax payable by that person.

“Residence” and “domicile” are different concepts; there is also a further concept known as “ordinary residence”.  Although the concept of ordinary residence is effectively being removed by the government, it may still be relevant for prior years.

Normally a person is considered resident in the country (or tax jurisdiction) in which they are based.  For tax purposes, residence is often looked at by reference to a tax year, so that a person’s residence status can change from one tax year to another.  A person will be ordinarily resident in the country in which they are habitually resident; this means that there has to be some degree of continuity over several tax years.

“Domicile” is not originally a tax term, but derives its meaning from other legal areas.  A person acquires a country of domicile at birth, and it is difficult to change this status without making a conscious decision.  A person can live in a country for decades without becoming domiciled in that country.  There are also circumstances where a person can be domiciled in a country that they have never even visited, because at birth a person usually acquires the domicile status of their father.

Often the residence or domicile status of a person becomes relevant when HMRC are carrying out a tax investigation and it transpires that there are assets abroad which would give rise to a tax liability if they were owned by someone who was UK resident and domiciled.  However, if it can be shown, say, that the person was not UK domiciled then there might be no tax to pay, or perhaps a reduced liability.

Sometimes HMRC will challenge a person who has claimed to be non-resident/domiciled in the UK so as to claim exceptions from tax liabilities.

Residence of Companies

Companies do not have an equivalent of the “domicile” status that can be attributed to an individual, but a company does have a residence status which can affect the tax payable by the company.

How can WLH Tax Help

If you think that your residence or domicile status could have an effect on your tax liability then WLH Tax can carry out a review of your circumstances to establish your residence or domicile status.  For your company we can review the circumstances to establish the residence status of the company.

If, as a result of our review, your tax affairs need to be discussed with HMRC, WLH Tax can negotiate with HMRC on your behalf so that agreement can be reached as to the correct tax treatment of any income or gains arising.

If you want WLH Tax to review your residence or domicile status, either to establish whether you need to declare some income or gains to HMRC by making a voluntary tax disclosure or because HMRC have already challenged your residence or domicile status, then please contact us for a free, confidential and no obligation discussion.  We are happy to have an initial free of charge meeting with prospective clients.

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