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A Domicile in the Sun? What you Need to Know …
By Christopher J Sherliker

A Will made in the country of one’s domicile usually covers the assets within that domicile, together with worldwide assets which are not immovable. In this context, a distinction is made between “movable” assets, for example, cash or stocks and shares, and “immovable” assets, for example, property and land.

Whilst it is possible for an English Will to cover worldwide assets, a foreign Will or Wills should be entered into in those jurisdictions where immovable property is owned. Any English Will which is silent – and most are – as to assets sited outside England and Wales is subject to the rebuttable presumption that it includes worldwide assets.

A person's estate is principally governed in accordance with the law of the country of domicile. To that extent, therefore, it could be said that domicile will be of particular relevance on the occasion of death.

Whilst we are generally domiciled in the country in which we are physically present, with the intention to remain permanently, shedding one’s domicile of origin and acquiring a new domicile – known as a “domicile of choice” – is a significant and onerous process, and HM Revenue & Customs (HMRC) are quick to seek to argue that an England and Wales domicile remains firmly in place.

To assist them in so doing, on the occasion of death, it is open to HMRC to make enquiries to establish an individual’s domicile. Such enquiries are, by their very nature, detailed examinations of background, lifestyle, habits and intentions over the course of a lifetime.

For those seriously considering emigration with a view to changing their domicile of origin, there are a number of core rules regarding changes to their personal circumstances that must be adhered to as an absolute requirement. These include:

  • Cutting all ties with the UK, for example, by selling UK property, closing bank accounts, cancelling club subscriptions and liquidating or transferring investments out of UK jurisdiction
  • Reinstating the above items in the new country
  • Ensuring that all friends and relatives appreciate the new choice of domicile
  • Changing your passport to take up new citizenship in the country of choice
  • Making sure that visits to the UK are limited or fleeting after giving up UK domicile
  • Ensuring that everyday actions indicate a permanent attachment to the country of choice
  • Ensuring that a foreign Will is drawn up and burial or cremation wishes show an attachment to the country of choice
  • Concluding business interests in the UK

Furthermore, for inheritance tax and capital gains tax purposes, a person may be treated as domiciled – referred to as ‘deemed domicile’ – in the UK even if an alternate domicile is established, if they were:

  • Domiciled in England and Wales at any time during the three years immediately preceding death – or other such times as HMRC seeks to determine your domicile – which together are referred to as the relevant time
  • Resident in the UK in not fewer than 17 of the 20 years of assessment ending with the year of assessment in which the relevant time falls

The result is that if it is established that an England and Wales domicile has been retained – or is deemed to have been retained – at the relevant time, then HMRC will levy inheritance tax on worldwide assets.

If it is established that you have shed your England and Wales domicile and have acquired an alternate domicile, then the location of assets is key. Only UK-situated assets come within the chargeability of HMRC and overseas assets are excluded. Those assets are, of course, subject to the local tax regime in the jurisdiction in which they are sited.

Clearly the legal implications are best considered well before one starts ordering cocktails on some leafy sun-kissed foreign shore, so do consult your specialist advisors as early as possible if you want to make a successful transition abroad.

Added: 20th December 2010

Christopher J Sherliker is a partner for Silverman Sherliker LLP who provide legal solutions across a spectrum of requirements.  Find out more about Silverman Sherliker LLP.

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