What is my Domicile?

[jia]

Can anyone help me establish my domicile.
I was born in the UK 30 years ago. My father was born in India in 1947 and come over to the UK in 1968.
He now spends his time equally between India and the UK.
I wish to open an NRI (Non-Resident Indian) account in India. I also have a house in India which my father transferred to me.
My intention is retire to India in my house in about 20 years time.
If I open this bank account in India (in pounds sterling) would I need to pay tak on it if I do not bring the interest back to the UK.

Regards

k

[frankie]

What is ‘domicile’?

Domicile is a concept of UK general law. Broadly speaking, to summarise the UK tax authorities consider that you are domiciled in the country of your permanent home. Domicile is distinct from nationality or residence. You may be resident in more than one country, but at any given time you can only be domiciled in one (see below).

At birth, you have what is known as a domicile of origin. This is normally your father’s domicile and may not necessarily be your country of birth. You keep this domicile until you acquire a different domicile, such as

· a domicile of dependence, or
· a domicile of choice.

What is a ‘domicile of dependence’?

Since 1 January 1974, everyone who is aged 16 or over in England, Wales or Northern Ireland is capable of acquiring an independent domicile. However, prior to that your domicile could have changed if your father had changed his domicile by permanently relocating the family to a new location.

How do I acquire a ‘domicile of choice’?

To acquire a domicile of choice you must sever all ties with your domicile of origin and settle in another country, with the clear intention of making your permanent home there.

Residing in another country for a long time is not proof that you have acquired a domicile of choice, unless it can be regarded as indicating your intention to do so. There has to be evidence of a firm intention to live there permanently.

Can I still be domiciled in the UK for tax purposes after I have acquired a new domicile under general law?

Yes. For Inheritance Tax purposes, there is a concept of ‘deemed domicile’. Even if you are not domiciled in the UK under general law you will be treated as domiciled in the UK at the time of a transfer if :-

· you were domiciled in the UK within the three years immediately before the transfer, or

· you were ‘resident’ in the UK in at least 17 of the 20 Income Tax years of assessment ending with the year in which you make a transfer.

If you do fall within the deemed domicile rules for IHT purposes, you will be exposed to IHT on your worldwide assets.

You should also note that we are expecting a review of the domicile system and proposed changes to be issued within the next few months. While we do not know exactly what the proposals will be, the expectation is that the length of time you would need to spend in the UK to become domiciled will be reduced.

Importantly, this is likely to be effective for Income, Capital Gains and Inheritance Tax.

Summary

From the above, and the facts you have given it would appear your father had a domicile of origin as Indian, as I presume that is what his father's domicile was.

Unless this Indian domicile of origin was displaced by a UK domicile of choice on moving to the UK in 1968 (please refer to "domicile of choice" above). He would remain as domicile of origin in India.

Your domicile is dependant on whether your father's domicile changed before you were born (therefore you will inherit his domicile), or whilst you were still a minor (therefore you will acquire a domicile of dependancy following your father's domicile of choice).

Also whether after 16 you have acquired a new domicile of choice from your father.

All the above are a dependant senarios would require further investigation of the particular facts of the case.