Non-Dom Changes – Formerly Domiciled Residents

This briefing focuses on the recent tax changes affecting individuals born in the UK with a UK domicile of origin who return to the UK having acquired a domicile of choice overseas (referred to as 'formerly domiciled residents'). These measures took effect from 6 April 2017.

Losing a UK Domicile of Origin

Domicile is generally construed as the place that an individual regards as their permanent home and with which they have the closest ties.

There are three types of domicile: domicile of origin, domicile of dependence and domicile of choice.

An individual has a "domicile of origin" which is fixed at birth and usually follows the domicile status of the individual's father if he was alive at the time of the birth and married to the individual's mother.

A domicile of origin can only be displaced by a domicile of dependence (this follows the father's domicile whilst the child is a minor) or a new domicile of choice. Once an individual becomes an adult, their domicile of origin/dependency may be displaced by consciously adopting a 'domicile of choice'.

In order to adopt a foreign domicile of choice, an individual must become resident in another jurisdiction and demonstrate that they have severed sufficient ties with the previous country of domicile and have the intention of living in their new country permanently or indefinitely, and making this new country their permanent home.

Note that an individual must positively acquire a domicile of choice in another jurisdiction. It is not sufficient to simply move overseas with no intention of ever returning to the UK. There must be a positive intention of remaining in the new jurisdiction permanently or indefinitely.

A peripatetic individual who does not settle permanently in a new jurisdiction is unlikely to acquire a domicile of choice overseas.

To demonstrate an acquisition of a domicile of choice in another jurisdiction, an individual will need to be able to demonstrate that they have the intention to reside there permanently or indefinitely without any real prospect of returning to the UK on any clearly foreseen and reasonably anticipated contingency.

Even in cases where an individual has the intention of living in their new country permanently, and they take all necessary steps to be able to demonstrate the acquisition of a domicile of choice overseas, there may be circumstances that cause them to return to the UK that were not envisaged at the time they left the UK.

It is not uncommon for...