Residency and domicile
Residency and Domicile are two closely linked terms, but do not actually mean the same thing. It would be helpful for individuals to know the difference between the two, especially for tax purposes.
What is residency?
Your residency status can be determined by many different factors. A person can be resident in more than one country in the tax year. It is possible to be resident in the UK under UK tax rules and at the same time be resident in another country under that country’s tax rules. This is referred to as dual residency. If you have a dual residence with the UK and another country, then a double taxation agreement should prevent you from being taxed twice on the same income. For more information, please see double tax treaties.
The Statutory Residency Test (SRT) has been in place since 6th April 2013. The SRT consists of a series of tests that need to be considered when determining your residency. This includes the number of days that you are present in the UK and number of ties that you have to the UK. You will also need to determine whether you meet the criteria for the UK and Overseas automatic tests. Please see our article for more information on the Statutory Residency Test.
What is domicile?
Domicile is the country in which a person has their permanent home or has a substantial connection with. When you are born, you are automatically assigned to the same domicile as your parents, normally your father, which is defined as your domicile of origin. Your domicile of origin will continue until you acquire a new domicile. You can only have one domicile at a time.
Whether or not you are domiciled in the UK is generally only relevant if you have foreign income and/or gains during a tax year as this will determine if any Income Tax or Capital Gains Tax is due. If you do not have foreign income and/or gains then your domicile status has no impact on your UK income Tax or Capital Gains position so you do not need to consider your domicile.
There are three types of domicile:
- Domicile of origin
- Domicile of choice
- Domicile of dependence
Domicile of origin
At birth everyone is automatically assigned with a domicile of origin. You will be assigned the same domicile as your parents, normally your father. However, if your parents were not married when you were born, you would acquire your mother’s domicile of origin. Your domicile of origin will often be the country where you were born. However, if you are born in a country in which your father was not domiciled then at the time you were born, your domicile of origin may be your father’s country of domicile.
Domicile of choice
You have a legal capacity to acquire a new domicile at the age of 16 (earlier in Scotland). To acquire a domicile of choice you must leave and cut all ties with your current country of domicile and settle in another country. If you are already living in a country other than that of your domicile, you will acquire a domicile of choice in that country if you intend to remain permanently or indefinitely. In either case you will need to provide strong evidence that you intend to live there permanently or indefinitely. It is not just a matter of being resident in a country, you will need to become a citizen of the new country and cease to be a citizen of your previous country of domicile.
Domicile of dependence
Until you have the legal capacity to change your domicile, it will follow that of the person on whom you are legally dependant. For example, domicile of origin from your father. If the domicile of the dependant changes, you will automatically acquire the same domicile, and your domicile of origin will become dormant. If you married before 1974, a married woman would automatically acquire her husband’s domicile. You would retain your husband’s domicile until you legally acquire a new domicile. If you married after 1st January 1974, your domicile will be decided in the same way as any other person who is able to have an independent domicile.
© Thandi Nicholls Ltd 2023 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, S Thandi or M S Bains cannot be held responsible for the consequences of any action or the consequences of deciding not to act.
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