Readers’ forum: Domicile decision
Writing for the Readers’ forum of Taxation magazine, BKL tax adviser Terry Jordan answers a query about the advantages and disadvantages of a US citizen applying for a UK passport.
‘My client is a US citizen but has been a long-term resident of the UK for many years. She comes within all the rules relating to deemed domiciles for inheritance tax and suchlike. The client is now considering whether to apply for a UK passport, but she will not seek to renounce her US citizenship. As far as I am aware, none of her other circumstances will change as a consequence.
Would HMRC consider that the application for a UK passport is strong evidence of the client having acquired a domicile of choice in the UK?
Further, are there any beneficial or detrimental tax aspects of becoming UK domiciled in fact, rather than simply being treated as having a deemed domicile?
It would be good to have such information to hand so that I can advise the client on whether proceeding with the citizenship application would be beneficial as far her tax affairs are concerned.
I look forward to hearing from readers on this issue.’
Query 19,038 – Dunedin.
Reply by Terry Jordan
‘It is implicit in the query that Dunedin’s client has a domicile of origin outside the UK. Because the US is a federal system, I assume that the client is domiciled in one of the states. The concept of domicile originated in the Roman empire – it is one of the things the Romans did for us. It is an aspect of private international law that connects a person with a particular territory and covers the validity of marriage, the effect of marriage on the rights of husband and wife, divorce and nullity of marriage, legitimacy, legitimation and adoption, wills of moveables and intestate succession to moveables.
In England and Wales, once a person reaches 16 they can acquire a domicile of choice by physical presence in a particular territory coupled with the present intention to remain there permanently. Before 1 January 1974, a woman automatically took her husband’s domicile on marriage. However, that rule was abolished so marriage after 31 December 1973 does not necessarily change a woman’s domicile. Women already married when the law changed retain the domicile acquired on marriage until it is supplanted by a new domicile of choice.
Various cases over the years are authority for the proposition that a person can be resident within the UK for many years without acquiring a domicile of choice here and obtaining a UK passport would not be determinative of the client’s domicile. The relevant principles here are usefully summarised by Mr Justice Cobb in the recent matrimonial case of U v J (No 2) (Domicile)  EWHC 449 (Fam).
Since Dunedin’s client is already deemed domiciled for UK inheritance tax purposes (and will be deemed domiciled for all tax purposes from 6 April this year on the premise that the September Finance Bill is enacted as expected) the acquisition of a domicile of choice here would, on the face of it, have little effect for taxation purposes. However, reference should be made to the US-UK double taxation agreement dealing with inheritance tax here and federal estate tax in the US.’