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Confusing your UK domicile status can have costly UK tax implications for expats

As a British expatriate living in South Africa or elsewhere, it is extremely important to fully understand the difference between the terms ‘domicile’, ‘deemed domicile’ and ‘residency’, and to know which status applies to you.

Not knowing the difference and assuming the wrong status, could prove to be a costly mistake.

This is especially true for high net worth individuals (HNWI), and especially when it comes to inheritance tax (IHT). You can ask yourself the question: are you 100% certain of your domicile or residency status, and that the UK and/or global assets in your estate will not be subject to a 40% Inheritance Tax charge in the UK?Know your UK Domicile Status

Unfortunately the answer is not a straightforward one. Various rules apply and HMRC will look at a number of factors at the time of your death to make a final determination. Apart from inheritance tax, the other two main areas in which your domicile status becomes very important in respect of your tax liabilities in the UK, are income tax (from investment or employment) and capital gains tax. This applies to everyone, but should be especially of concern to high net worth individuals who stand to pay substantially more.

“At Carrick Wealth, we have come across instances where people mistakenly thought they were not UK domiciled, only to find out that in fact they were. To their dismay they found out that they had tax obligations to HM Revenue and Customs (HMRC) in the UK of which they had been blissfully unaware. It is vitally important for expats to ascertain their correct status regarding domicile or residency to avoid not meeting one’s tax obligations or to end up paying unnecessary taxes,” says Michael Potts: director: retail sales at Carrick.

It is important to remember, however, that even if you are an expat living outside of the UK, you will still be subject to inheritance tax in the UK if you have UK domicile status or are deemed by HMRC to have domicile status.psd

Also, likely to add to the confusion, is the Finance Bill 2017 currently passing through the British Parliament. It contains new proposals seeking to bring UK residential property into the IHT net if held by a trust or a close company. But in the case of an individual, wherever he/she resides, the rules have not changed.

In a nutshell, residency is not the same thing as domicile. Domicile is determined by the country in which a person officially has his or her permanent home, or has a strong connection with. At birth you are automatically assigned the same domicile status as your parents, your domicile of origin. This domicile status will remain until you actively acquire a new domicile. But, importantly, even if you relocate to another country, your domicile status is unlikely to change unless you take specific action.

But once again, there are a myriad of ifs and buts involved, and knowing which rules apply will depend on which is the correct status that applies to you.

If you are a UK Expat with assets in the UK or globally, take steps to reduce your estate’s IHT exposure, or plan accordingly and complete our questionnaire.  The online questionnaire is to be completed by yourself and your partner/spouse and, on completion, it will be automatically submitted to Carrick. Once Carrick receives the completed questionnaire, a qualified Carrick adviser will contact you. It will only take between 10 and 15 minutes of your time to complete the questionnaire, depending on how much of your and your partner’s details you have readily available.

For any additional assistance in this regard, feel free to contact us at contact Carrick at

Carrick Wealth is a registered South African financial services provider specialising in South African and international financial planning. Carrick is also licensed in Zimbabwe and Botswana, and holds three global licences in Mauritius. Carrick at all times maintains its  independence with regard to product providers and asset managers, and provides bespoke risk assessment, financial planning and other services to high net worth individuals (HNWI). Through partnerships with industry leaders in the fields of foreign exchange, tax, international property, offshore bank accounts, trusts, wills and estate planning, Carrick is able to provide the highest levels of service for your financial planning and investment requirements, both offshore and domestic.

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