How to establish domicile status

[mmp97]

I am 54, British-born and domiciled, and have lived and worked outside UK since 1987. My wife is 50, Egyptian-born but UK naturalized, and only lived for three years in the UK prior to 1987, when she left to accompany me. We own properties in four different countries including the UK.

How do I establish my wife's domicile status?

She has lived in the Philippines for 9 years, but has no intention of permanently residing here. She has not lived in Egypt since about 1975, though her family lives there and we own two properties there. We intend to have a brief period of residence in the UK from 2008, while putting our children through secondary school, before moving on. In fact we have no intention of permanently residing anywhere, but I am content to accept that I am UK-domiciled.

Is she domiciled in Egypt? In the UK? In the Philippines? How would I ascertain the Revenue's view? It seems to me important, because I understand that the IHT treatment of property put into trust can be affected by the settlor's domicile at time of establishment. How do I ascertain what the Revenue is, in future, likely to deem her domicile to have been? Can they be asked now for a binding opinion? How would one go about that?

Would it help establish her non-domiciliary status if we sold our jointly-owned UK apartment?

[maths]

Your wife's domicile status at birth would have followed that of her father if legitimate or mother if illegitimate.Prima facie this would appear to have been Egyptian.

The fact of UK naturalisation of itself would not affect this.

If she married you before 1.1.74 then she would have lost her Egyptian domicile at that time and would have acquired your domicile ie UK (even so in this case it would still be possible for your wife to reacquire her Egyptian domicile but would not necessarily be easy).

Marriage on or after 1.1.74 would not have affected her Egyptian domicile.

She is certainly not Philippine domiciled.

Assuming she possesses an Egyptian domicile it would be difficult for HMRC to argue she had become UK domiciled. This would involve them arguing successfully that she not only actually resided in the UK but intended to reside there permanently.

The possession of a house in Egypt plus family there helps to support her argument that she has not lost her original domicile.

Rulings from HMRC on domicile status generally cannot be obtained; basically it is a question of fact and may of course change in the future depending upon intention etc.

One option might be to sell one of your overseas properties (leaving the money outside the UK) when she becomes UK resident circa 2008. Tell HMRC of the sale and argue no cgt to pay as she is in her view non-UK domiciled.

The answer to your last question is "no".

[Taxbar]

It will only be possible to get a ruling on your wife's Domicile by either making a chargeable transfer for IHT above £275,000 approx and filing an IHT 100 form.

Or for income and capital gians tax having some foreign source tax at stake when UK Resident and Ordinarily Resident.

The better option is to have an expert written opinion by a specialist in the field taking into account all the facts and information and giving a view of your Wife's Domicile.

Daniel Feingold
STP
info@stratax.co.uk

[mmp97]

The opinion would have what sort of value? The Revenue would surely not consider itself bound by a an opinion penned by a lawyer, however eminent, for his client. But if (different point) you are suggesting that two legal minds looking at a situation where 'all the facts' have been stated (tall order) would almost certainly arrive at the same view, isn't that over-optimistic? The revenue after all is an interested party.

[maths]

The HMRC would of course not be bound by any legal opinion.

Typically domicile status will be determined when a transaction arises where the domicile status would have to be decided (as indicated in my earlier comment).

I suspect Daniel Feingold was suggesting that domicile staus is tricky and can only be determined when all facts are known.Such an opinion may offer you comfort prior to instituting any tax planning.

[Taxbar]

I've made this point before and most Non-Domicile specialists are familiar with it!

Domicile is a question of Law:

Private International Law and the leading practitioner text on this area Dicey and Morris is usually quoted in contentious cases on Domicile.

An Opinion as to a person's Domicile taken at the time of any planning is often persuasive to the Revenue.

Most Big 4 Accountants and City Law firms will usually obtain such an Opinion when carrying out planning based on Domicile: In addition to, or where a Revenue ruling cannot be obtained.

In several cases I have been involved with such Opinions have been persuasive and saved millions of pounds of tax for well advised clients.


Daniel Feingold
STP
info@stratax.co.uk

[mmp97]

Thanks Daniel, much appreciated. I will certainly factor this in.

[johnfkavanagh]

While I respect Daniel's view on this, I think it is fair to say that Daniel's estimation of the value of a legal opinion is rather greater than my own. My experience in the Big 4 firm (as it now is) that I worked for for several years was that legal opinions were not routinely obtained where tax planning was carried out for non-domiciliaries. I suppose that it is arguable that an opinion may have greater value in contentious cases, but I am not entirely persuaded that obtaining an opinion would be worthwhile even in those cases.

John Kavanagh
UK Tax Consulting Ltd
Chartered Tax Advisers
www.uktaxconsulting.co.uk
mail@uktaxconsulting.com
Tel: 020 7060 1660
Fax: 020 7060 1663

[maths]

I think the views of Daniel and John to some extent reflect differences in approach between accountants and lawyers.

Domicile for a practitioner in the international tax arena is not a difficult concept to advise on without counsel getting involved.

Having counsel's opinion may offer comfort to the practitioner with limited expertise in the domicile arena but for others with more experience counsel's opinion is likely in practice to be of limited value.

After the best part of 25 years advising on international tax matters including domicile issues i can count on one hand the number of times a counsel's opinion was sought.

[johnfkavanagh]

I think there is some considerable truth in what maths says about the differences in my and Daniel's respective approaches. That said, I am not in fact an accountant although since I have worked among accountants for many years (indeed I was a partner in a firm of Chartered Accountants at a time when non-CA partners were quite rare), perhaps I have acquired some of their ways!

I have to say that I completely concur with what maths says in his last three paragraphs.

John Kavanagh
UK Tax Consulting Ltd
Chartered Tax Advisers
www.uktaxconsulting.co.uk
mail@uktaxconsulting.com
Tel: 020 7060 1660
Fax: 020 7060 1663