{"id":10119,"date":"2022-04-18T10:08:51","date_gmt":"2022-04-18T02:08:51","guid":{"rendered":"https:\/\/www.infinitysolutions.com\/?p=10119"},"modified":"2022-04-18T10:08:51","modified_gmt":"2022-04-18T02:08:51","slug":"four-myths-about-domicile","status":"publish","type":"post","link":"https:\/\/www.infinitysolutions.com\/blog\/four-myths-about-domicile\/","title":{"rendered":"Four Myths About Domicile"},"content":{"rendered":"

UK chancellor, Rishi Sunak, and his wife, Akshata Murty, have well and truly put the question of domicile in the spotlight. This is an issue that affects British expatriates living in Asia and many myths abound. Here is a lowdown of some of the most common myths about domicile. <\/em><\/p>\n

Akshata Murty\u2019s non-domicile status, based on the fact that she is Indian, with Indian parents, and allegedly plans to return to India at some point (according to Rishi<\/a>), has enabled her to avoid paying tax on the assets she holds outside the UK, even though she is a permanent resident. These are reportedly worth a cool \u00a311.5million in dividends from her stake in her father\u2019s India-based IT business.<\/p>\n

You may not have Murty\u2019s millions, but UK domicile affects many expatriates living in Asia, and often they are unaware of it. Given the profound impact your domicile status (and that of your spouse) could have on your tax liability, it\u2019s crucial to understand it.<\/p>\n

Let\u2019s debunk some common domicile myths:<\/p>\n

1. I live outside the UK, I must be non-domiciled<\/strong><\/span><\/h4>\n

Residence and domicile are two entirely separate things, although expatriates often make the mistake of assuming that being non-resident in the UK makes them non-doms.<\/p>\n

Living abroad, even for a lengthy period, does not<\/strong> change your domicile status. Any ties you have to the UK could be used by HMRC as proof of UK domicile. These may include property owned in the UK, bank accounts held there, sending children to school there, strong family ties back home, frequent holidays to visit family etc. If you were born in the UK, to UK parents, and you maintain ties there, and if you haven\u2019t taken specific steps to acquire a domicile of choice (an onerous process), chances are that you remain UK domiciled.<\/p>\n

2. I am not British, I must be non-domiciled<\/strong><\/span><\/h4>\n

Changes to domicile rules brought in by HMRC in 2017 created the new tax status of \u2018deemed domicile\u2019. This applies to long-term non-dom residents of the UK. Those who have lived in the UK for 15 out of the previous 20 years are considered deemed domicile. Murty has only lived in the UK since 2015 so this does not currently apply to her but would do if she remains resident for another eight years.<\/p>\n

3. I\u2019m going to declare myself non-domiciled<\/strong><\/span><\/h4>\n

While Ms. Murty has, up to now, legally been able to declare herself non-domiciled in the UK, and paid the \u00a330,000 required to avoid a tax bill in the millions on all her assets held abroad, that loophole is not available to UK domiciled individuals living outside the UK.<\/p>\n

You can theoretically obtain a domicile of choice however you must be prepared to live and pay taxes in your domicile of choice, cut all financial ties with the UK and not foresee any reason to return to the UK. Even then, HMRC can challenge non-dom status at any time. They have the final say and the onus is on you, or those who inherit your assets, to prove no ties.<\/p>\n

4. I\u2019m off HMRC\u2019s radar, they don\u2019t know what I earn<\/strong><\/span><\/h4>\n

The introduction of the Common Reporting Standard has facilitated the reporting of information between different financial institutions and jurisdictions. It basically means that information is automatically shared on an annual basis, and assets cannot be hidden. You will more than likely face severe penalties by trying to remain under the radar. This is an extremely risky policy and not to be advised under any circumstances.<\/p>\n

Domicile and UK tax<\/strong><\/span><\/h5>\n

There are two major tax implications for expatriate Brits living in Asia of domicile status:<\/p>\n

Income tax:<\/strong><\/span> UK domiciled individuals pay tax on worldwide income (although double tax treaties apply in some jurisdictions)<\/p>\n

Inheritance tax:<\/strong> Whereas interspousal transfers between two UK domiciled individuals are exempt from inheritance tax, this is not the case for those in mixed race partnerships.<\/p>\n

You\u2019ll find a more in-depth overview of domicile and UK inheritance tax here<\/a>.<\/p>\n

UK expats living in Asia should take advice on domicile and tax liability<\/strong><\/span><\/h5>\n

One thing the case of Akshata Murphy demonstrates is just how complicated the issue of domicile can be. That\u2019s why it is critical for all expatriates living in Asia to be well informed on their obligations and liabilities.<\/p>\n

We cannot stress enough how important it is to take advice from the professionals because, as we have seen, there is a lot of false information flying around. Don\u2019t trust what you read on expat Facebook groups or what your colleague tells you. Your circumstances may be very different to theirs. Take professional advice based on your unique situation.<\/p>\n

The good news is that a competent financial adviser with experience of cross-border issues may be able to devise a financial planning strategy which can reduce your tax liability<\/a>.<\/p>\n

If you\u2019d like to clarify your domicile, discuss your tax liabilities, and find legal ways to reduce your tax bill, why not chat to one of our highly experienced financial advisers? Send us an email<\/a> and we\u2019ll get back to you.<\/p>\n","protected":false},"excerpt":{"rendered":"

UK chancellor, Rishi Sunak, and his wife, Akshata Murty, have well and truly put the question of domicile in the spotlight. This is an issue that affects British expatriates living in Asia and many myths abound. Here is a lowdown of some of the most common myths about domicile. Akshata Murty\u2019s non-domicile status, based on…<\/p>\n","protected":false},"author":2,"featured_media":10120,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[153,66,69],"tags":[],"class_list":["post-10119","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-viewpoint","category-financial-planning","category-153","category-66","category-69","description-off"],"acf":[],"yoast_head":"\nFour Myths About Domicile | Infinity Financial Solutions<\/title>\n<meta name=\"description\" content=\"This is an issue that affects British expatriates living in Asia and many myths abound. 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