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HMRC internal manual

Inheritance Tax Manual

Domicile: Introduction

The law of domicile is important for Inheritance Tax (IHT) for several reasons:

  • It is a common law concept that will determine which rules apply for succession to personal (movable) property, wherever it is situated, and help establish ‘who gets what’.
  • It limits the charge to IHT to people domiciled in the UK or with assets sited in the UK. For example if someone creates a settlement with assets outside the UK, when they are not domiciled in the UK, the settlement could be excluded from the charge to Inheritance Tax (IHTM04000). 
  • It is one of the conditions for leaving the value of non-sterling bank accounts (IHTM04380) in the UK out of account.
  • As part of protective and anti-avoidance legislation. For example:

    • Spouse or civil partner exemption may be limited if the recipient is domiciled outside the UK
    • Long term tax residents of the UK may be treated as being domiciled in the UK for the purposes of IHT, even though they have a domicile outside the UK under general law (IHTM13024)
    • Those who were UK domiciled but have emigrated recently could also be treated as being domiciled in the UK (IHTM13024).
  • Lastly, double taxation conventions (IHTM27161) apply to people domiciled in certain countries and this will have tax implications. For example:

    • Property can be removed from the charge to IHT, depending on the terms of the convention.
    • The availability of a tax credit can depend upon the ‘fiscal’ domicile of the taxpayer, which may be defined by the terms of the convention.