HMRC internal manual

Residence, Domicile and Remittance Basis Manual

RDRM20040 - Domicile: Introduction and Background: 'Deemed domicile' for Inheritance Tax Purposes

This section is included as background. For detailed information about ‘deemed domicile’ and inheritance tax in general you should refer to the Inheritance Tax Manual.

Deemed Domicile

It is possible for an individual to be ‘deemed’ to be domiciled in the UK for the purposes of Inheritance Tax only, while being domiciled at common law in a territory outside the UK.

Deemed domicile in the UK can arise in two ways.

Section 267(1)(a) IHTA 1984 provides for the ‘three-year’ rule. This applies where the individual was domiciled in the UK on or after 10 December 1974 and within three calendar years before the relevant event.

Section 267(1)(b) IHTA 1984 is the basis of the ‘17 out of 20 year’ rule. For the rule to apply the individual must have been resident, for Income Tax purposes, in the UK on or after 10 December 1974 and in not less than seventeen out of the twenty years of assessment ending with the one in which the relevant event falls.

This was amended with the introduction of deemed domicile from 6 April 2017, with the 17 out of 20 rule reducing to 15 out of 20 from this date. For more information on deemed domicile see RDRM25000 onwards.

These rules usually apply both for transfers on death and lifetime transfers that are chargeable to Inheritance Tax when made. The only exception is for transfers on death where the deceased person’s domicile was Italy, France, India or Pakistan.

Sections 267(2) and 158(6) IHTA 1984 preclude the application of section 267(1) to the Double Taxation Conventions ‘with respect to duties on the estates of deceased persons’ between the UK and the countries referred to in paragraph above. These conventions were negotiated before 1975. More recent ones are not covered by this restriction.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)