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Where Taxpayers and Advisers Meet

Would IHT be payable in this scenario?

teejaydee
Posts:9
Joined:Wed Aug 06, 2008 3:52 pm
Would IHT be payable in this scenario?

Postby teejaydee » Wed Nov 12, 2014 5:09 am

I would like to ask if my thinking (see below) is correct. I appreciate my question includes Irish tax implications, of which responders may be unfamiliar, but any responses would be gratefully received.

I was born in the UK, to a father who was domiciled in Ireland. I lived in the UK with my father for a sufficient number of years to acquire a UK domicile of dependency. I left the UK many years ago, but have not yet acquired a domicile of choice as I have moved around a lot and have not yet settled in any one country. I therefore have reverted to my Irish domicile of origin.

The subject of IHT crops up because I now wish to make a Will. The Irish equivalent of inheritance tax (Capital Acquisitions Tax) is payable by the recipient of the inheritance, and includes the following rule on when CAT becomes payable:

An inheritance is taxable if:
(a) the disponer was ROI resident or ordinarily resident at the date of the disposition, i.e., the date of death, or
(b) the successor was ROI resident or ordinarily resident at the date of the inheritance.

Otherwise, only the part or proportion of the property situate in the ROI at the date of the gift is taxable.

I (the disponer) am not ROI resident, and therefore assume no CAT would be due as long as any successor was not ROI resident and if no Irish situate property is included in the disposition. In other words, the fact that I have an Irish domicile is irrelevant.

No UK IHT would be payable because I am no longer UK domiciled.

Of course if I acquire a domicile of choice, the situation may change, but if I were to die beforehand, no inheritance tax would be payable.

Is this thinking correct?

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Would IHT be payable in this scenario?

Postby LozaACCS » Wed Nov 12, 2014 6:56 pm

You need to examine the domicile position of your father.
Whilst your father was domiciled in Ireland you had a domicile of origin in Ireland, (I assume you lived with him)
If your father replaced his own domicile with a domicile of choice in the UK, you would automatically acquire a domicile of dependency in the UK until at least the age of 16.
You do not however revert at age 16 to a domicile of origin (Ireland), it is necessary for you to leave the UK and adopt a domicile of choice somewhere else.
From the details supplied I suspect you have retained a UK domicile (assuming of course that your father acquired a UK domicile of choice at some point)

teejaydee
Posts:9
Joined:Wed Aug 06, 2008 3:52 pm

Re: Would IHT be payable in this scenario?

Postby teejaydee » Thu Nov 13, 2014 7:12 am

Many thanks Loza for your reply.
You need to examine the domicile position of your father.
Whilst your father was domiciled in Ireland you had a domicile of origin in Ireland, (I assume you lived with him)
If your father replaced his own domicile with a domicile of choice in the UK, you would automatically acquire a domicile of dependency in the UK until at least the age of 16.
Yes, I agree that at birth I acquired an Irish domicile of origin. I also understand this domicile was superseded by a UK domicile of dependency. In turn, this became a domicile of choice.
You do not however revert at age 16 to a domicile of origin (Ireland).
Again, I agree that a return to a domicile of origin is not automatic at any age.
It is necessary for you to leave the UK and adopt a domicile of choice somewhere else.
This is where my understanding differs from yours. My understanding is that if an individual leaves the UK, he or she reverts to his or her domicile of origin, before a new domicile of choice is acquired. My understanding comes from the HMRC manual RDRM22300, which includes the following:

Loss of domicile of choice

Loss of a domicile of choice requires cessation of both residence and intention.

The laws of the UK employ the doctrine of the revival of the domicile of origin in situations where a domicile of choice has been abandoned without the acquisition of another domicile of choice.

Other countries do not use this approach, preferring to treat a domicile of choice as continuing until displaced by a new one.
From the details supplied I suspect you have retained a UK domicile (assuming of course that your father acquired a UK domicile of choice at some point)
Your assumption that my father acquired a UK domicile of choice is correct. However, from my reading of the HMRC manual (see above), I believe that having abandoned my UK domicile of choice (albeit without acquiring a new domicile of choice), I have reverted to my Irish domicile of origin.

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Would IHT be payable in this scenario?

Postby LozaACCS » Thu Nov 13, 2014 8:50 pm

I think we differ on your assertion that your DOD became a DOC.
The references you quote refer to a DOC, I cannot see that you have had a DOC unless from the age of 16 you decide to settle in another country, from your own statements you have not established another domicile which (in my opinion) leaves you with a DOD in the UK.
Look at HMRC 6 4.3.2.

teejaydee
Posts:9
Joined:Wed Aug 06, 2008 3:52 pm

Re: Would IHT be payable in this scenario?

Postby teejaydee » Fri Nov 14, 2014 3:28 am

I think we differ on your assertion that your DOD became a DOC.
The references you quote refer to a DOC, I cannot see that you have had a DOC unless from the age of 16 you decide to settle in another country, from your own statements you have not established another domicile which (in my opinion) leaves you with a DOD in the UK.
Look at HMRC 6 4.3.2.
Many thanks Loza. You are of course, correct in this opinion. I had previously confused DOD and DOC, an error for which I apologise. Having read your comments, and re-read the HMRC guidance, I now concur with your opinion that I am indeed UK domiciled.

Thank you for the time and trouble you expended on my question. It's very much appreciated.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Would IHT be payable in this scenario?

Postby maths » Fri Nov 14, 2014 7:38 pm

I was born in the UK, to a father who was domiciled in Ireland. I lived in the UK with my father for a sufficient number of years to acquire a UK domicile of dependency. I left the UK many years ago, but have not yet acquired a domicile of choice as I have moved around a lot and have not yet settled in any one country. I therefore have reverted to my Irish domicile of origin.
At birth you take the domicile of your father at that time assuming your are legitimate; if not, then you take your mother's domicile at that time.Your domicile is then your domicile of origin.

Thus it appears you have an Irish DoO.

Until age 16 your domicile follows that of your father as a domicile of dependency. If your father did not prior to you becoming age 16 change his domicile then you simply retain your Irish DoO (subject to a change after you were 16 by acquiring a domicile of choice). However, if prior to you becoming age 16 your father acquired an English DoC then your Irish DoO would become an English DoD. On attaining age 16 this English DoD becomes an English DoC on your part.

On leaving the UK (with the English DoC) nothing changes unless at that time or subsequently you abandon this English DoC. If you do not abandon it, it continues. If you abandon it then either your DoO resurrects automatically or you immediately acquire a new DoC.

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Would IHT be payable in this scenario?

Postby LozaACCS » Fri Nov 14, 2014 10:53 pm

Maths
As a non lawyer (I and perhaps the OP ) would be grateful for the legal authority that supports the contention that a DOD automatically becomes a DOC on the 16th birthday.
How does the OP go about abandoning his UK domicile (whether DOD or DOC) without creating a domicile somewhere else, I cannot see how a DOO can kick in by doing nothing, which is i think what you are suggesting

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Would IHT be payable in this scenario?

Postby maths » Sat Nov 15, 2014 9:22 pm

Loza



A minor's DoO may become a DoD should the father (assuming legitimate) change his domicile whilst the minor is below age 16. An individual is not capable of acquiring a domicile of choice until attaining age 16. Assuming the minor's DoO changed to that of a DoD (due to father's domicile change) then this sticks until attaining age 16 at which time the individual is then able to acquire a DoC.However, on attaining age 16 as the DoD cannot continue then this DoD effectively becomes re-categorised as a DoC (in the territory in which the DoD applied).

The cases of Re Macreight (1885) and In the Goods of Patten (1860) are normally cited as authority for this. Re married women and DoD see Domicile & Matrimonial Proceedings Act 1973 s1(2).

A DoC can be abandoned.

A DoD cannot be abandoned and neither can a DoO.

To abandon a DoC requires two things; first, ceasing to reside in the territory and secondly, ceasing to have an intention to continue to reside in the country permanently.

If a DoO has been replaced by a DoC then if the DoC is abandoned without concurrently acquiring a New DoC then the DoO automatically resurrects; however, it is quite possible to acquire a DoC and immediately acquire another DoC thus precluding the DoO from resurrecting.

teejaydee
Posts:9
Joined:Wed Aug 06, 2008 3:52 pm

Re: Would IHT be payable in this scenario?

Postby teejaydee » Sun Nov 16, 2014 10:03 am

At birth you take the domicile of your father at that time assuming your are legitimate; if not, then you take your mother's domicile at that time.Your domicile is then your domicile of origin.

Thus it appears you have an Irish DoO..
I was legitimate, and therefore I agree that I have an Irish DoO.
Until age 16 your domicile follows that of your father as a domicile of dependency. If your father did not prior to you becoming age 16 change his domicile then you simply retain your Irish DoO (subject to a change after you were 16 by acquiring a domicile of choice). However, if prior to you becoming age 16 your father acquired an English DoC then your Irish DoO would become an English DoD. On attaining age 16 this English DoD becomes an English DoC on your part.
Based on my reading of the HMRC guidance on the subject, I believe my father did change his domicile before I reached the age of 16. He severed all his ties with Ireland. He lived permanently in the UK, bought a house in the UK, worked in the UK, had bank accounts in the UK, etc. There seems little doubt that he acquired a UK DoC. By the time I reached the age of 16, he would in any case have been deemed a UK domicile for IHT purposes.

From what you say, maths, I would at some time before the age of 16, have acquired a UK DoD. At age 16, this would automatically have become a UK DoC.
On leaving the UK (with the English DoC) nothing changes unless at that time or subsequently you abandon this English DoC. If you do not abandon it, it continues. If you abandon it then either your DoO resurrects automatically or you immediately acquire a new DoC.
This was certainly my understanding, based on HMRC RDRM22300, which states:

Loss of domicile of choice

Loss of a domicile of choice requires cessation of both residence and intention.

The laws of the UK employ the doctrine of the revival of the domicile of origin in situations where a domicile of choice has been abandoned without the acquisition of another domicile of choice.

teejaydee
Posts:9
Joined:Wed Aug 06, 2008 3:52 pm

Re: Would IHT be payable in this scenario?

Postby teejaydee » Sun Nov 16, 2014 10:54 am

To abandon a DoC requires two things; first, ceasing to reside in the territory and secondly, ceasing to have an intention to continue to reside in the country permanently.
The first test of having abandoned a DoC (ceasing to reside in the territory) seems easy to prove, as it is based on facts. However, the second test (ceasing to have an intention to continue to reside in the country permanently) is somewhat more difficult to prove. I understand the following actions could be used to help support a claim for a new domicile of choice:
• Establishing a permanent home in the new country
• Gaining citizenship or nationality in the new country
• Establishing a business or getting a job there
• Having children educated there
• Living there with your spouse/partner
• Voting there
• Making funeral arrangements there.

Could I use this same list in reverse, as a guide as to the "major" actions needed to abandon a DoC, ie.:
• Disposing of a permanent home in the UK
• Ceasing to have a business or a job in the UK
• Taking children out of UK education
• Ensuring your spouse/partner do not live in the UK
• Ceasing to vote in the UK
• Having no funeral arrangements in the UK
If a DoO has been replaced by a DoC then if the DoC is abandoned without concurrently acquiring a New DoC then the DoO automatically resurrects; however, it is quite possible to acquire a DoC and immediately acquire another DoC thus precluding the DoO from resurrecting.
So, If I cease the "major" ties (see above) before acquiring a new DoC (by temporarily living a nomadic existence), my Irish DoO resurrects. Subsequently, when I settle in a new country and establish ties there, I shall acquire a DoC in the new country.

After having ceased the "major" ties, if I were to retain "minor" ties to the UK, such as:
• Keeping ISAs and bank accounts in the UK
• Retaining UK private pension and state pension entitlements
Is it likely that HMRC would be able to argue I failed to sever all ties to the UK, and therefore regard me as having retained my UK DoC?


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