If someone moves abroad, they often wonder what the difference is between residence and domicile. Being aware of the differences and being aware of obligations is essential for tax purposes both in your new country and in the UK. Get it wrong, and there could be severe financial consequences, however knowing whether you are resident or domicile is not especially easy to understand.
DOMICILE AND RESIDENCE STATUS EXPLAINED
A domicile is where someone has a permanent home or substantial connection. When someone is born they are automatically assigned the same domicile as their parents. This then continues until a new domicile is acquired even if the person then moves abroad. Domicile is vital when determining tax liabilities from income tax, inheritance tax and capital gains tax. It is also important when determining how an estate is passed on after death and is especially important when financial assets or property are owned in foreign jurisdictions.
Someone is considered to be resident for tax purposes if they are present for over 183 days in the tax year. If someone works abroad for over a year, they must not return for over 91 days in any year period. Ordinarily resident means that someone spends most of their time in that location without taking extended trips overseas.
It is very common for people to be unsure about whether they are resident or domicile and therefore, if you need further clarification we can help you out. We can give you a consultation to assess your current residency status, can advise you about ways in which we can reduce your tax burden and can advise you on how to manage your UK assets more efficiently. As qualified accountants, we can use our expertise to help you to meet your obligations and to stay within the law.