In recent months, “non-doms” have returned to the political spotlight, with the Labour Party confirming that, if elected to power, they would abolish (or at the very least markedly change) the regime.
Over the coming weeks, we will be publishing a series of articles exploring the “non-dom” regime in the UK, how it might be changed as a result of potential political change and what alternatives there are to it across the world. In this first piece, we set out the essential elements of the current system.
The benefits of the regime have been curtailed by legislation passed by previous administrations, most notably in the Finance Act 2008 and again by the Finance (No2) Act 2017, however it is still utilised by many people who come to live in the UK from abroad.
In light of media and political attention being given to the topic, Georgina Hamilton and Hannah Wailoo provide a brief summary of the regime and the key terminology involved.
What is domicile?
The concept of a person’s domicile is different to that of a person’s nationality or place of residence. A person is generally domiciled in the jurisdiction which is their ‘permanent home’. This may or may not be the country where they live full time, or the country/ies of which they are a national.
Under English law, everyone acquires a ‘domicile of origin’ at birth, although over time the jurisdiction in which a person is domiciled may change, if they either acquire a new ‘domicile of dependency’ or a ‘domicile of choice‘. A person’s domicile is not always straightforward to determine, especially for those who spend much of their lives living and working in different places throughout the world.
For UK tax purposes, there is also an additional category known as ‘deemed domicile’ which applies to people who are long term resident in the UK but who do not adopt a domicile of choice here.
The categories of domicile are briefly summarised as follows:
Domicile of Origin – This is determined by the domicile of a person’s father at the time of that person’s birth, provided that the person is legitimate and born during their father’s lifetime. A person who was illegitimate at birth (even if later ‘legitimated’ by their parents’ subsequent marriage) or who was legitimate but born after their father’s death, will have a domicile of origin determined by the domicile of their mother at the time of his birth.
Domicile of Dependency – If the domicile of a legitimate or legitimated child’s father changes before the child reaches the age of 16, the child acquires their father’s new domicile as a ‘domicile of dependence’, unless the child’s parents lived apart while the child was under the age of 16 and the child had a home with their mother and no home with their father, in which case their domicile is dependent on that of their mother.
Domicile of Choice – After a person reaches the age of 16, they can acquire a new domicile, a ‘domicile of choice’, as and when they go to live in a country or state and show an intention to live in that country or state permanently or indefinitely
Deemed domicile – A person who is not domiciled in the UK under general law (because they do not have a UK domicile of origin, dependency or choice) is ‘deemed domiciled’ in the UK for tax purposes once they have been tax resident in the UK for 15 out of the previous 20 tax years. Determining an individual’s residence status is a separate exercise.
It is not possible to have multiple domiciles and it is not possible to be without a domicile. Unless and until a domicile of choice (or dependency) is adopted in another country, a person’s domicile of origin remains in place.
What is a ‘non-dom’?
‘Non dom’ is short for ‘non-domiciled’ and refers to an individual who is not domiciled, or ‘deemed domiciled’, in any part of the UK. It therefore covers people who were born outside of the UK to non-UK domiciled parents. Non-doms become relevant to the UK tax and legal system when they come to live in the UK or when they have other connections to the UK, such as investing in assets here.
It is possible for a person to move to the UK and live here full time but retain their domicile of origin in their home country. This is known as a ‘resident non dom’ or ‘RND’. Their non-dom status will only change if they adopt an intention to remain permanently in the UK or if they live here on a long term basis (over 15 years).
Next week, we will explain why domicile matters, the key taxes that are impacted by the regime and what to expect if the Labour Party is elected to power.
If you would like any advice in relation to your UK residence or domicile position or on the remittance basis of taxation or wider succession matters, please contact Hannah Wailoo, or your usual Withers contact.
For further information, please contact:
Hannah Wailoo, Partner, Withersworldwide
hannah.wailoo@withersworldwide.com
