1. Services

Residence and Domicile Enquiries

Whether taxpayers are individuals or companies, questions of "residence" and "domicile" have considerable impacts on UK taxes.

Additionally, with penalties of up to 200% for “offshore errors” the cost of a successful challenge by HMRC can be high.

While "residence" is sometimes confused with "domicile," "non-doms" (i.e. individuals not domiciled in the UK) have attracted much media attention in recent years.

Residence

As a general rule, a person is considered to be a "resident" of the country in which he or she lives or spends a substantial amount of time. As HMRC considers "tax residence" every tax year, the status of that person may, in effect, change from tax year to tax year. In these investigations, HMRC often seeks large amounts of private information to strengthen their case, which is very detailed and intrusive.

Domicile

The term "domicile" is different from "residence" although they are often used interchangeably. A person's domicile is generally determined at birth, and HMRC believes that it is difficult to change it unless certain clear and conscious steps are taken. It is further complicated by the general concept that individuals acquire their father's location and domicile status. For UK resident taxpayers with domicile abroad, there can be advantages to that non-domicile status and, where there are tax advantages, there is the risk of HMRC investigation.

Investigations

High-trained HMRC members often focus on income or assets abroad when reviewing an individual's residence or domicile status. A UK tax liability could arise if that income or those assets were within the UK or owned by an individual residing and domiciled in the UK.

A company's tax liability is different from that of an individual since there is no concept of "domicile" status. However, a company can also be “non-resident” which can have a considerable effect on the tax payable by that company.

In addition, as a company being "non-resident" may reduce or extinguish that company's tax liability, this is another area of frequent HMRC investigation.

If your residence or domicile status are being investigated or challenged, we recommend that you consult a specialist as soon as possible.