UK: Statutory definition of tax residence

HM Treasury has set out its plans to reform the definition of tax residence in the light of last year's consultation.


Inheritance tax (IHT) liability will not be affected. Liability to inheritance tax (IHT) is mainly determined by an individual’s domicile status rather than by tax residence. Generally, if a UK domiciled individual dies, their worldwide estate is chargeable to IHT. By contrast, the estates of non-domiciles are liable to IHT on UK assets only. Lifetime transfers can be chargeable to IHT if an individual was domiciled in the UK at the date of the transfer. If they were not domiciled in the UK, the transfer could only be chargeable to IHT if the assets were sited in the UK. B.10 However, individuals who are otherwise not domiciled in the UK under general law are deemed to be UK domiciled for IHT purposes if they have been tax resident in the UK in not less than 17 out of the 20 tax years ending with the year in which a transfer occurs. This applies regardless of whether the transfer is made during their lifetime or on death. Domicile is a general law concept and is not defined for tax purposes. Broadly speaking it is where an individual has their permanent home or intends to settle permanently. The law ascribes a domicile to every person at birth, usually inherited from their father. Individuals who have lived, or come to live, in the UK for a number of years can retain non-domicile status if they can show that they do not intend to remain in the UK permanently or indefinitely.

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