Understanding Residence and Domicile
Residence: A person is considered resident in the country (or tax jurisdiction) where they are based. For tax purposes, residence is often evaluated based on a tax year, allowing a person’s residence status to change annually.
Ordinary Residence: Although the concept of ordinary residence is being phased out by the government, it remains relevant for prior years. A person is ordinarily resident in the country where they habitually reside, indicating some degree of continuity over several tax years.
Domicile: Unlike residence, domicile is a legal concept that a person acquires at birth and is difficult to change without a conscious decision. A person can live in a country for decades without becoming domiciled there. Typically, a person acquires the domicile status of their father at birth, meaning one can be domiciled in a country they have never visited.
Relevance in Tax Investigations
Residence or domicile status becomes particularly relevant during HMRC tax investigations, especially if there are foreign assets involved. If it can be demonstrated that a person is not UK domiciled, they may face no tax liability or a reduced one.
HMRC may challenge a person’s claimed non-residence or non-domicile status to verify tax exemptions.
Residence Of Companies
Unlike individuals, companies do not have a domicile status but do have a residence status which affects their tax obligations.
How We Can Help
Our specialist Tax team can assist in determining your residence or domicile status, which could influence your tax liability. We offer:
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Review of Circumstances: We assess your residence or domicile status to determine its effect on your tax obligations. For companies, we establish the residence status.
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Negotiation with HMRC: If necessary, our specialist team can negotiate with HMRC to reach an agreement on the correct tax treatment of any income or gains.
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Voluntary Disclosure and Defence: Whether you need to declare income or gains to HMRC through a voluntary disclosure or HMRC has challenged your status, we can provide expert assistance.
If you would like us to review your residence or domicile status, contact us for a free, confidential, and no-obligation discussion. We offer an initial free-of-charge meeting for prospective clients.