Dom status

[riccardob]

Hello,

I have a specific question on the dom status of my parents.

I understand that the dom issue is complicated however I would like to know if one spouse can be considered uk domiciled and the other non uk domiciled for iht purposes even if the marriage is pre 1974.

I have read somewhere that the wife follows the husband's domicile if they were married pre 1974. For information purposes the couple have lived together since marriage. Or can the wife's domicile be independent from that of her partner?

Regards,

[riccardob]

More detail:

Husband is italian born in Italy.
Mother is dual national british italian but born in the uk

[maths]

The common law provides that a pre 1 January 1974 marriage results in the wife acquiring a dependant domicile on her husband at the time of marriage.

On 1 January 1974 her deemed domicile doesn't change but is reclassified as a domicile of choice. This means that henceforth she can acquire a domicile of choice (or her domicile of origin may revive) which is different from that of her husband.

However, in practice, if she continues to live with her husband the likelihood of her being able to establish a different domicile during this time is extremely remote; if she divorced or husband dies then it would be possible for her to then change the domicile she acquired on marriage.

Thus, both spouses will either be non-UK domiciled or both UK domiciled.

For UK IHT purposes it is possible for an individual to be "deemed" UK domiciled (yet the individual for other tax purposes remain non-UK domiciled).

There is also a somewhat limited double tax agreement re IHT between the UK and Italy that for IHT may be important (on death).

[riccardob]

Thanks maths.

So if hmrc class them as non uk dom they are only liable to uk iht on uk assets.

If they class them as both uk doms then worldwide assets are included in iht BUT the nil band rate would be 650k.

My worry was that hmrc could pull a fast one on first death and say that one is non uk dom and the other one is thus limiting the nil band rate to 380k.

If the coupld live together in the uk or italy and have always lived together I guess hmrc would find it difficult to claim different dom for each spouse?

[maths]

Correct.

Transfers from non-UK dom to UK dom are made up of nil rate band of £325,000 plus £55,000 exempt (ie strictly nil rate band not £380,000), but know what you mean.

Because of the DTA is may be theoretically possible for husband to die Italian domiciled and at that time for wife to be UK domiciled or vice versa; although in practice i would have thought unlikely.

Domicile requires a factual determination.

If you are concerned it may be worth talking professional advice.

[Lee Young]

The limit on transfers (£55k plus NRB) applies only where a domiciled spouse is leaving his/her estate to the non domiciled spouse. Otherwise full spouse exemption and two nil rate bands apply. Typo by maths!

[maths]

Typo by maths!

Very kind Lee !!