The concept of domicile
The English common law concept of domicile is one that has developed through centuries of case law, rather than being set out in statute. In broad terms, it relates to the country to which an individual is most closely connected and where they have their permanent home.
Every individual must have one, and only one, domicile under UK law. Although we generally refer to 'the UK' as shorthand, we actually mean one of the three legal jurisdictions that make up the UK: England & Wales; Scotland or Northern Ireland. It is distinct from residence, nationality and citizenship, so is not necessarily determined upon the country of residence. Domicile is dependent on numerous factors sometimes hidden in the grey areas of case law, but it is more specifically based on a person's country of birth, their family's origin and their own choice to establish a permanent home in a particular country.
There are three main types of domicile that have been established:
· Domicile of origin - This is the domicile that is acquired by an individual at birth, which is usually the same as your father's domicile. However, if the parents are not married at the time of birth, or your father dies prior to birth, an individual’s domicile of origin is that of the mother.
· Domicile of dependence - This is the domicile that an individual acquires through the domicile status of someone on whom they are dependent (usually their father, as above) changing their own domicile status before they reach the age of 16. Women who married before 1 January 1974 automatically acquired the domicile of their husband - thankfully, women are now assessed independently!
· Domicile of choice - This is a domicile that an individual acquires after the age of 16 by way of their actions and intentions. A domicile of choice is formally established by evidencing that the individual has a permanent home in the country of choice; that they have the intention to live there permanently or indefinitely and that they have severed all ties with their domicile of origin or dependence. Therefore, it is possible for an individual to have a domicile of choice that is different from their domicile of origin or dependence.
It should also be noted that since 6 April 2017 there is also the concept of deemed domicile, whereby some individuals who are not UK domiciled under the general law are treated as if they are domiciled in the UK for income tax, capital gains tax and inheritance tax purposes.
Establishing domicile of choice
Domicile of choice is considered the most difficult to establish because it is based on a person's subjective intentions and actions, rather than their birth or dependent status. It is also very hard to displace a domicile of origin, this permanently exists and will return if a domicile of choice is acquired, but later lost. To establish a domicile of choice, an individual must demonstrate that they have a permanent home in a particular country and that they have the intention to live there permanently or indefinitely.
This can sometimes be challenging to prove, especially if a person has ties to multiple countries or has frequently relocated, therefore this point is most commonly scrutinised by HMRC and gives rise to many enquiries. There are a couple of recent cases on this regarding living taxpayer’s domicile which highlight important points to bear in mind.
Coller v HMRC
The recent decision in the First-tier Tribunal in Coller v HMRC  is an example of HMRC successfully challenging an individual's domicile position and the aforementioned incremental scrutiny of the domicile status of individuals.
The tribunal concluded that despite Mr Coller's father having an Austrian domicile of origin, he had acquired a UK domicile of choice by the time of his son's birth when fleeing Nazi occupation in the 1930s. Mr Coller's father was found to have had a settled intention to remain in the UK. The tribunal also concluded that Mr Coller himself would have acquired a domicile of choice in the UK, regardless of his father's status, based on the length and quality of his residency. For example, he was born in the UK, established a family here and had no home elsewhere.
As well as this, it highlighted that the actions of relevant parties are important, rather than just a stated intention and is therefore of note more broadly than the facts. The number and quality of links to the countries applicable are also relevant. It also stated that a domicile of origin, whilst usually hard to displace, would be lessened if there are few, if any, links to the country of domicile of origin. It will therefore be relevant to see what happens next and if there’s an appeal.
The importance of taxpayers having clarity on their domicile position
Given the degree of scrutiny applied by HMRC in their enquiries into domicile status, individuals must continually review their position and ensure they have substantial evidence to support their position. This is applicable to anyone claiming to have a non-UK domicile, whether they have arrived in or left the UK.
As specialists in residence and domicile, Sanctoras ensure our clients have a thorough understanding of their circumstances and the implications of any changes to their residence and domicile position. We also provide support in complying with HMRC's requirement in evidencing residence and domicile position.
If you are a client and have any queries about this topic, please feel free to talk to your usual contact at Sanctoras. If you haven't worked with us yet, any of our team would be happy to talk over your individual circumstances.