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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Domicile: Introduction and Background: A background to domicile

This and the next three sections provide a brief overview of domicile as a concept, and of its role within the common law. It also touches upon the idea of the ‘law territory’, which is the unit in respect of which common law domicile functions. Also refer to RDRM20060 and RDRM20070 which deal briefly with circumstances in which the word ‘domicile’ takes a meaning different from its common law one.

These sections are provided for context and for general interest. In practice it will generally be possible to determine an individual’s domicile without being familiar with this background information.

Municipal Law and Connecting Factors

The world is divided into a number of different territories, each of which is subject to its own system of law, known as ‘municipal law’. These legal systems vary from territory to territory so the courts of one territory have to take account of the municipal laws of other territories.

Where a court is faced with circumstances that are sufficiently connected with a foreign system of municipal law it is necessary for that court to consider the relevant foreign law so as to choose the appropriate municipal law by which the case should be decided. The aim of the court is, broadly to connect an individual with a particular system or rule of law; domicile is one possible ‘connecting factor’ that the courts may use.

The UK does not use only domicile as a connecting factor. The formal validity of a marriage is regulated by the law of the place where the ceremony takes place, and intestate succession to immovable property depends upon the location of the property. These are both established connecting factors. However, domicile is the connecting factor for intestate succession to movable property and, probably, for capacity to marry.

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Source and Residence Basis of Taxation

It is a feature of most taxation systems that income, and in most cases gains, arising from sources within a country are taxable under the laws of that country. Limited exemptions and reliefs might be granted under municipal law or taxing rights might be ceded under a double taxation convention, but the underlying principle is unaffected.

Where income and gains arise from sources outside a country, the municipal law of that country will either not tax such items or it will define a connecting factor or factors by reference to which tax liability will arise.

Residence is a widely-used connecting factor, and in many countries it is the only one. In the UK it is the basic factor. Residents of the UK are liable to tax on their worldwide income and gains, subject to certain exceptions. Domicile can be regarded as a connecting factor for some individuals in respect of, for example, the taxation of foreign income and gains, as well as for the other matters listed at RDRM20030.