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Being a UK domicile is relevant when it comes to working out the IHT liability on the deceased’s estate and the forms being submitted to HMRC and the Probate Registry.

If the Deceased was a UK domiciled, the IHT liability is calculated on the all of their worldwide assets. However, if the deceased is not UK domiciled, the IHT liability arises only on their UK assets.

As there is no definition of domicile within the UK legislation, reference to being a domicile must be made to the same tests that would apply for income tax purposes by considering:

• Domicile of Origin,

• Domicile of Choice and

• Domicile of Dependency.

Before 6th of April 2017 for the purposes of IHT, there were two important tests that need to be taken into consideration before determining an individual’s domicile status. If the said tests are met, it will override any other domicile tests.

• The individual resided in the UK for income tax purposes for at least 17 out of the 20 years ending with the tax year in which they passed away (residence for 16 years and 1 day will count as 17 years), or

• The individual was domiciled in the UK under the English Law at any time in the three years before they died.

After 6th of April 2017 a statutory deemed domicile test for IHT has been included in the Finance Bill 2017. For an individual to now be deemed as UK domiciled, they only need to meet one of the two following tests:

Test 1

They were a “formerly domiciled resident” for the relevant tax year meaning:

• They were born in the UK;

• Their domicile of origin was in the UK;

• They were resident in the UK for that tax year; and

• They were resident in the UK for at least one of the two tax year’s immediately preceding that tax year.

Test 2

They were resident in the UK

• For at least 15 out of the previous 20 tax years immediately preceding the tax year in question; and

• For at least one of the four tax years ending with the relevant tax year.

The changes do not have effect in relation to a person who has not been resident in the UK after 5 April 2017.