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HMRC internal manual

Inheritance Tax Manual

Domicile: Finance (No 2) Act 2017 changes: deemed domicile - number of years

Until 6 April 2017 the Inheritance Tax (IHT) legislation treated an individual as UK domiciled at the relevant time if they were resident in the UK in not less than 17 of the 20 years of assessment ending with the year in which the relevant time falls (IHTM13024). The new rules with effect from 6 April 2017 change the 17 years to 15, and the 20 year period will be the 20 years prior to the relevant year. It is still the case that an individual may be treated as UK domiciled even though they are not resident in the UK at the relevant time.

Example 1

The relevant time is in 2020/21. Under the old rules, the 20 years were 2001/02 to 2020/2021 inclusive. Under the new rules (effective from 6 April 2017) the 20 years are 2000/01 to 2019/20 (the 20 years immediately preceding 2020/21).

Alan has a non-UK domicile of origin. He has been resident in the UK for all years 2003/04 to 2018/19 (16 years). He is not UK resident in 2019/20 and 2020/21. Under the old rules, he would not have been deemed UK domiciled in 2020/21 as he would have been UK resident for only 16 years of the 20 years to 2020/21. Under the new rules, he is deemed UK domicile in 2020/21 as he has been UK resident for 16 of the 20 years to 2019/20. Indeed he became deemed domicile under the new rules in his 16th year (2018/19) and retains that domicile in 2019/20 and 2020/21.

Example 2

The relevant time is 2020/21. Under the new rules the 20 years are 2000/01 to 2019/20. Akram has a non-UK domicile of origin. He has been resident in the UK for all years 2005/06 to 2019/20 (15 years). He is deemed UK domiciled in 2020/21 as he has been UK resident for 15 of the 20 years to 2019/20. This is true even if he is non-resident in 2020/21.

But if Akram is non-UK resident in 2019/20 then he would have been resident for only 14 out of the 20 years preceding the relevant time in 2020/21 and so he would not be deemed UK domiciled in 2020/21.

There is a transitional rule. The 15 out of 20 year test does not apply to people leaving the UK before 6 April 2017 provided that they do not return, as shown in the following example.

Example 3

Ralph has a German domicile of origin. He has been resident in the UK from 2002/03 to 2016/17 (15 years). Even if he is non-resident for the whole of 2017/18, he would normally become deemed domiciled under the new 15/20 rule in the 16th year. However, if the first year in which he would otherwise have been deemed UK domicile is 2017/18 and he does not resume UK residence then the transitional rule applies and he is not UK deemed domicile.