IN DETAIL: TAXATION
What is UK Domicile and Why Does it Matter? Establishing a new domicile of choice can be challenging. Protecting assets once domicile has been proven can be a legal minefield. – By Jason Pearce
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ost countries do not have the concept of domicile; they use residence and/or citizenship to determine personal tax matters. These three constructs are legally different – it is entirely possible to be resident in one country, a citizen of another, and domiciled in a third country, all at the same time. There is no single legal definition of domicile; it is broadly the country with which you have the most significant tie(s). Everyone is born with a domicile of origin, which is the domicile of your father if your parents were married, or the domicile of your mother if not. From the age of 16, it is possible to change to a new domicile of choice, but this is more difficult than is commonly supposed – in the words of HM Revenue & Customs (HMRC): “The laws of the UK make it clear that domicile is not easily changed, and so it is unlikely that an adult‘s
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operative domicile will alter unless the individual makes profound and extensive changes to his or her lifestyle, habits and intentions.”1 “The burden of proving a change of domicile rests with the party that asserts the change… A change of domicile is never to be lightly inferred, particularly a change from a domicile of origin to a domicile of choice, which is regarded by the courts as a serious step requiring clear and unequivocal evidence.”2 In practice, severing ties to the UK and spending a long period as an expatriate is not enough to displace a domicile of origin – new ties to the domicile of choice need to be formed, such as a declared intention to live in a country permanently or indefinitely. If you work for many years in Hong Kong but do not intend to spend your retirement here, you will not have established a domicile of choice here.
