Domicile?

I'm sorry if this has been answered already, but I've read most of the posts in this board, and am now completely confused. I would appreciate it if someone could explain the legal definition of domicile, and its implications with respect to taxes, savings, etc.  In particular, for the hypothetical case of an American living in the UK with a British spouse, and with dual American/British nationality.

As a UK Tax Consultant I can say that Domicile is actually a difficult concept to understand. But the basics, as from the the UK's HMRC booklet IR20 :-

4    Domicile

4.1   Domicile is a general law concept. It is not possible to list all the factors that affect your domicile, but some of the main points are explained in this Chapter.
4.2   Broadly speaking, you are domiciled in the country where you have your permanent home. Domicile is distinct from nationality or residence. You can only have one domicile at any given time.

Domicile of origin

4.3   You normally acquire a domicile of origin from your father when you are born. It need not be the country in which you are born. For example, if you are born in France while your father is working there, but his permanent home is in the UK, your domicile of origin is in the UK.

Domicile of dependency

4.4   Until you have the legal capacity to change it - see paragraph 4.5 - your domicile will follow that of the person on whom you are legally dependent. If the domicile of that person changes,  you automatically acquire the same domicile (a domicile of dependency), in place of your domicile of origin.

Domicile of choice

4.5   You have the legal capacity to acquire a new domicile (a domicile of choice) when you reach age 16. To do so, you must broadly leave your current country of domicile and settle in another country. You need to provide strong evidence that you intend to live there permanently or indefinitely. Living in another country for a long time, although an important factor, is not enough in itself to prove you have acquired a new domicile.

Married women

4.6   Before 1974, when you married you automatically acquired your husband’s domicile. After marriage this domicile would change at the same time as your husband’s domicile changed. If your marriage ended, you kept your husband’s domicile until such time as you legally acquired a new domicile.

This rule is modified by the terms of the double taxation agreement between the UK and the USA. A marriage before 1974 between a woman who is a US national and a man domiciled within the UK is deemed to have taken place on 1 January 1974 for the purpose of determining her domicile on or after 6 April 1976 for UK tax purposes.
4.7   From 1 January 1974 your domicile is not necessarily the same as your husband’s domicile. It is decided by the same factors as for any other individual who is able to have an independent domicile. If, however, you were married before 1974 and had acquired your husband’s domicile (see paragraph 4.6), you retain this after 1 January 1974 until such time as you legally acquire a new domicile.

Overseas electors

4.8   From 6 April 1996 registering and voting as an overseas elector is not normally taken into account as one of the factors for determining whether you are domiciled in the UK, for the purpose of establishing your tax liability here.

Tax treatment of those not domiciled in the UK

4.9   Those who are resident in the UK but not domiciled here receive special tax treatment in respect of income and gains arising outside the UK. For details, see paragraphs 5.12 and 6.2 (income tax) and 8.8 (capital gains tax). We will consider the question of your domicile only where this will affect your current tax liability.

For inheritance tax purposes, see booklet, ‘Customer Guide to Inheritance Tax’.

Quite a bit of detail there but on this board probably the most important part is that marriage to someone does not, by itself, change a person's domicile.

Someone who has lived in the UK for 7 out of 10 tax years is now required (from 6 April 2008) to pay £30,000 to claim the remittance basis.  Thus non-UK domicile status is now of much less benefit from a UK tax perspective than it was in previous tax years because in the past one would have only paid UK tax if that non-UK income was remitted to the UK.

If the remittance basis is not being claimed this means that worldwide investment income/gains are now reportable in the UK as well as in the US.

Domicile remains relevant for UK inheritance tax as well as for estate tax in several US States. 

Thanks John and Guya.  But I am still confused.  Is domicile something that has to be declared in some way?  And, if 

Broadly speaking, you are domiciled in the country where you have your permanent home.

, but

Living in another country for a long time, although an important factor, is not enough in itself to prove you have acquired a new domicile.

, then what is?  Hypothetically speaking, would an American citizen who has lived in the UK for 20 or so years, and rarely visited the US, be considered domiciled in the US or the UK?

would an American citizen who has lived in the UK for 20 or so years, and rarely visited the US, be considered domiciled in the US or the UK?

Let's assume, just to make it easier, that their domicile was in the US, prior to them coming to the UK. Then the question is ... have they done enough to have a Domicile of Choice in the UK? Answer, that depends! Does this person ever intend to return to the US and live there, for example in their retirement years? If yes, then they are probably still domiciled in the US.

However if they intend to live out their days in the UK, they have probably acquired a Domicile of Choice in the UK.

That person from the US might not having a US domicile? Totally possible. For example, say their parents were Canadian, but thanks to Work Permit, if needed, they lived and worked in the US, were there at the time of their child's birth, and after their child became an adult they did in fact return to live in Canada. The person would at least start with a Canadian domicile, and it would be a question of looking at the facts to see if they had later acquired a US domicile.

I have a horrible thought that rather than simplify matters this post might make matters worse. Apologies in advance if that is the case.

John, thanks for the explanation.  I think you have cleared up some of my confusion.  I'm still not sure of what the ramifications are,  in terms of inheritance tax, etc, for being domiciled in one country or the other.  But I guess that can wait until I'm certain where I am actually considered domiciled.

What if a person expects, at the present, to stay permanently in the UK, but eventually changes their mind?  Hypothetically speaking.

Domicile is a concept of general law, not tax law. Because the UK has an unwritten constitution the definition is one that can only be inferred from case law - not statute.

One would typically therefore start with case law from the 13th and 14th centuries - and move forwards (in fact the concept is drawn from Roman law so is over 2,000 years old).

Recent case law confirms that a domicile of origin is extremely tenacious, so one would need to abandon connections in the original jurisdiction and acquire similar connections in that new place.

So for a person from the US to abandon domicile in their State of origin & acquire domicile in one of the countries that comprise the UK would be extremely unusual.

Mere residence for the long-term is certainly no evidence of change.

If a change has taken place but the domicile of choice is lost then one reverts to the domicile of origin (which can be a country/State/Province/Territory/Canton where one has never lived or visited).

If one is not domiciled in the UK & has non-UK income or gains then the status would be claimed annually a UK tax return.

Inheritance tax has a concept of deemed domicile after 17 tax years of UK residence (in practice this can be as short as 15 real years).  Given that the US bases estate tax on citizenship estate planning by a specialist familiar with both sets of rules is vital especially if one has a spouse/partner who is not a US citizen.

Guya, thanks loads for that! I'm still pretty confused about my own situation, but I understand the general concept now, I think.  Is there a list somewhere of financial advisers with expertise in both US and UK rules?