Losing UK domicile in 2010/2011

Given the relatively high rate of UK inheritance tax, many people look to lose their UK domicile status when they leave the UK. This has the advantage of ensuring that overseas assets are outside the scope of UK inheritance tax. It also means that they can hold UK assets via an offshore company to take UK assets out of the scope of UK inheritance tax. However, losing UK domicile status is not an easy task. It's often been said that it is harder to lose UK domicile than UK residence, and whilst this is still true the current approach to residence status certainly narrows the gap between the two. Most people who are UK domiciled will have a UK domicile of origin (due to their parents being UK domiciled). As such when they leave the UK they will need to show that their domicile of choice is overseas. Note that for inheritance tax purposes there are provisions which deem you to be UK domiciled for 3 years after leaving the UK. Therefore you would need to wait for 3 years in any case. However, what's of more importance is that if you have the UK as a domicile of origin, in order to lose this you need to actively make an overseas country a domicile of choice. This involves actually residing there and having sufficient intention to remain there for the rest of your days ie permanently. If there was no such intention then the domicile of origin would revive. As such if you did not show sufficient intention to reside in a specific country you would remain a UK domiciliary. This is something that HMRC seem to be taking much more notice of. This is a risk that many non doms face as they may move overseas for a few years intending to move on elsewhere. This would not be sufficient to establish an overseas domicile of choice. It's therefore not enough to simply show a desire never to return to the UK, you need to actually show a desire to live overseas in a particular country. Of course if you have a foreign domicile of origin this would also not be an issue as even if you failed to establish an overseas domicile of choice your domicile of origin would revive and you would still be non UK domiciled for UK tax purposes (subject to the deemed domicile rules). It's therefore very important when looking at establishing a foreign domicile of choice that you can fix your residence and intentions in a particular country.