Deemed Domicile rules

Find out about changes to the deemed domicile rules for Income Tax and Capital Gains Tax from 6 April 2017.

Before the 6 April 2017 if you were resident but not domiciled in the UK under common law you:

  • were liable to UK tax on all income and capital gains which arose in the UK
  • could claim the remittance basis and only pay UK tax on your foreign income and capital gains when remitted to the UK
  • could claim tax relief on overseas workdays for the first 3 years you were resident in the UK

Changes from April 2017

From 6 April 2017 new deemed domicile rules came into force.

If you aren’t domiciled in the UK under English common law you’re treated as domiciled in the UK for all tax purposes if either Condition A or Condition B is met.

If you meet the new deemed domicile rules you will no longer be able to claim the remittance basis of taxation and will be assessed on your worldwide income and gains on the arising basis.

The deemed domicile rules for Inheritance Tax are also changing.

Condition A

To meet this condition you must:

  • be born in the UK
  • have the UK as your domicile of origin
  • be resident in the UK for 2017 to 2018, or later years

Condition B

Condition B is met when you’ve been UK resident for at least 15 of the 20 tax years immediately before the relevant tax year.

Counting the number of years

All UK tax years of residence must be counted including:

  • tax years under the age of 18
  • any tax year split into a UK and overseas part should be counted as a year of UK residence (for example if you depart from or arrives in the UK during a tax year)

More information on split years and the Statutory Residence Test (SRT) can be found in chapter 5 of the RDR3: Statutory Residence Test.

Domicile status

Losing deemed domicile status

You can lose deemed domiciled status under Condition B, if you leave the UK and there are at least 6 tax years as a non UK resident in the 20 tax years before the relevant tax year.

If you acquire a domicile of choice outside of the UK

If you were born in the UK and have a UK domicile of origin at birth, you can acquire a domicile of choice outside the UK under common law, if you’ve resided in another country or law territory with the intention of staying there permanently.

If you then return to the UK on or after 6 April 2017 and become UK resident for that year, you will automatically be deemed domiciled in the UK for tax purposes, under Condition A.

Leaving the UK before 6 April 2017

Condition B won’t be met if:

  • you’re not UK resident for the relevant tax year
  • there is no tax year beginning after the 5 April 2017 and before the relevant tax year in which you were UK resident
Published 31 January 2018