Contributed by Calibrate Partners, London, UK

Recent changes to UK inheritance tax (“IHT”) administration signal increased scrutiny into the affairs of deceased individuals when their executors claim that he or she was not domiciled in the UK at the time of death.  This will be of particular interest to those who were born in the UK but who now reside in another country and claim their UK domicile of origin has been displaced by a domicile of choice elsewhere.

As a recap, where an individual is domiciled in the UK, all of their worldwide assets are within the scope of IHT up to a rate of 40%.  However, only UK situated assets are within the scope of IHT where an individual is not domiciled in the UK, a position which can afford estates valuable UK tax benefits. The law of domicile is different to tax residency.

The additional information now sought by HMRC includes the following:

  • The deceased’s domicile of origin must now be disclosed, and
  • The details of all addresses at which the deceased stayed during visits to the UK, as well as the length of and purpose of each visit.

This appears to be a manoeuvre by HMRC to lay foundations for detailed investigations into the domicile position of deceased individuals born in the UK but who claim to have changed their domicile status during their lifetime.

In these situations, we recommend advice be taken their lifetime. As part of such a review, an individual can build a strong file used to support their non-UK domicile status should an enquiry by HMRC ever arise. It is often far more time and cost effective to collect evidence in support of non-UK domicile status during an individual’s lifetime rather than relying on second-hand testimonies once an individual has passed away, which typically hold no weight during an enquiry.

This is particularly important if one must rely on evidence, witness statements or signed affidavits.

We at Calibrate Partners are experts in providing UK domicile advisory services, please do not hesitate to contact us should you have any queries in relation to the recent changes or any other questions about the law of domicile in the UK.

Dated: []