What is Domicile
Domicile is a general law concept that has been adopted by tax law. Broadly speaking you are domiciled in the Country where you have your permanent home. You can only have one domicile at any given time.
Rules on determining domicile can be summarised as follows:
(i) When you are born you acquire a domicile of origin. This is the domicile of your father (this will NOT necessarily be you were born). If born illegitimately then you acquire the domicile of your mother.
(ii) On attaining the age of 16 it is possible for you to lose your domicile of origin and acquire a domicile of choice. You may retain your domicile of choice indefinitely. You may acquire a new domicile of choice.
Avoiding the Acquisition of a United Kingdom Domicile of Choice
The concern of the foreign domiciliary should be to avoid acquiring a domicile of choice in the United Kingdom.
In simple terms, in order to acquire a United Kingdom domicile of choice, the individual (in addition to residing in the UK) must also have decided to live in the UK permanently/indefinitely and NOT to live anywhere else. This is an extremely difficult thing for the Inland Revenue to prove. For example, why would anyone make such a commitment; nowadays with the global workplace being bigger and more accessible not even UK Domiciles are likely to commit themselves to such a statement.
Take the following cases that have been decided in the UK Courts:
(i) In IRC v Bullock [1976] STC 409 the taxpayer resided in England for 40 years but he always hoped to return to his home of Nova Scotia should he survive his wife or persuade her to return to Nova Scotia. The Court decided that the taxpayer had NOT acquired a UK domicile of choice. In this case the Judge commented on an earlier case as follows:
"A domicile of choice is acquired when a man fixes voluntarily his sole or chief residence in a particular place with an intention of continuing to reside there for an unlimited time".
The Judge went on to expand the above statement as follows:
"I accept that statement... with this qualification only that the expression "unlimited time" requires some further definition. A man might remove to another country because he had obtained employment there without knowing how long that employment would continue but without intending to reside there after he ceased to be employed. His prospective residence in a foreign country would be indefinite but would not be unlimited in the relevant sense".
(ii) In Buswell v IRC [1974] STC 266 Mr Buswell, despite residing in the United Kingdom for periods totalling nearly 30 years, the Court decided that the taxpayer had NOT acquired a UK domicile of choice.
Other factors that have been decisive in the Court deciding that the taxpayer had NOT acquired a UK domicile of choice.
Tax:
(i) if a person moves from a high taxed country to the UK intending to return home when the tax regime is more favourable he is unlikely to acquire a domicile of choice in the UK.
(ii) if an person intended to remain in the UK only so long as UK tax law remains favourable to foreign domiciliaries, it is unlikely that he would acquire a domicile of choice in the UK.
Retaining a Foreign Domicile while Resident in the United Kingdom
An individual coming to the UK and wishing to retain his foreign domicile in order to retain tax advantages may live in the United Kingdom as long as he wishes but he should not form the intention to settle here permanently. He should also take steps to demonstrate this intention:
(i) To leave the UK in due course. The individual should, if possible, retain ties with his country of origin, for example, by regular visits home, business interests, bank accounts, membership of social, political and religious groups, take out a will under local law, request to be buried in "home" country.
(ii) NOT to reside indefinitely in the UK by minimising commitments in the United Kingdom. Purchase of a house is OK. Avoid getting involved in UK politics, and/or social and religious organisations that would conflict with your home country beliefs.
Ultimately the onus is on the Inland Revenue to prove that you intended to stay in the UK and NOT on you to prove that you were going to return home. Therefore the above pointers are useful but not absolutely necessary.