What is domicile ?

[ukbalaji]

I am not clear on how Inland Revenue defines domicile. In my case I am a U.K permanent resident but still hold my Indian passport and the only home I own is in India. So I suppose my country of domicile is India since I was born and lived a good 20 years there as well.

But once I get my British passport, (say next year) will this change ? Or, will my domicile change only if I buy a home in the U.K ?

I have heard that Mr.Lakshmi Mittal, the steel tycoon still retains his Indian passport. Maybe it is just loyalty to his home country but I wonder if it has anything to do with tax laws as well ...

I read an interesting article where it says "Britain has one of the most business-friendly tax environments on the planet, exemplified by the non-domicile (or “non-dom”) tax laws. In simple terms, these allow wealthy foreign nationals to hold their main liquid assets in tax-free offshore environments while operating freely within the UK — largely untroubled by the Exchequer (the same is not true of British nationals)."
http://www.timesonline.co.uk/article/0, ... 78,00.html

While I do pay full tax on my U.K income of course, I have some investments abroad (this money was not earned in the U.K and not brought into the U.K) so I dont intend to pay high rate tax (on the income generated by these investments) in the U.K. I wonder if this will change tho', once my domicile becomes U.K.

Hence my original question. I do hope I get some feedback on this here. Thanks a bunch in advance.

[Wanderer]

I think the term 'domiciled' and 'habitually resident' have the same meaning, so I'd say since u live in UK, you are such for tax purposes.

It's over 10 years since I did any tax work tho.

Steve, ex accountant and glad to be out of it

[ukbalaji]

Thanks Wanderer.

I dont think its that simple. I did check with the company that manages pensions for all of us at the company I work for, and they said my country of domicile appears to be India, even tho I live and work here in U.K

I do want to clarify this thru the proper legal channel tho. I have called up Inland Revenue and they dont seem to be able to authoritatively tell me one way or the other. I could sense the people I spoke to sounded confused themselves.

Should I be talking to a tax attorney ? I dont mind paying a modest amount for good sound advice, but I dont want to end up paying 100 - 200 quid for 15 minutes of conversation. wonder what I should do ..

[JAJ]

I think the term 'domiciled' and 'habitually resident' have the same meaning,

They don't have the same meaning.

Domicile:
http://www.ind.homeoffice.gov.uk/docume ... iew=Binary

Ordinary Residence:
http://www.ind.homeoffice.gov.uk/docume ... iew=Binary

And regarding naturalisation applications where the applicant is not married to a British citizen:
http://www.ind.homeoffice.gov.uk/docume ... iew=Binary

2.2.4 Information may also come to our attention that the Inland Revenue regards an applicant as domiciled abroad for tax purposes. In such cases, we should request the applicant's permission to contact the Inland Revenue. We should then ask the Inland Revenue to provide us with a copy of the applicant's completed "Domicile Enquiry" questionnaire, which may throw some light on future residence intentions. If permission is not forthcoming the application should be refused.

NB. The replies to the domicile questionnaire should not be given undue weight, and they should not form grounds for refusal if they merely indicate that applicants see their ultimate home as a country other than the UK. (It is not a requiremnt for naturalisation that applicants intend to make their home permanently in the UK.)

The bottom line in all of this is that naturalisation is a strong indicator of acquiring a British domicile for tax purposes (especially if not married to a British citizen) but may not be conclusive evidence of this.

See tax advisor if this is important. Although many people would question why someone would place greater value on a fiscal advantage compared to British citizenship.

And FWIW, my own view is that it is not really acceptable that permanent residents of the United Kingdom - who have full access to British healthcare, education and social services - should not make exactly the same tax contribution to these services as expected from British citizens in the same circumstances.

[John]

In my case I am a U.K permanent resident but still hold my Indian passport and the only home I own is in India. So I suppose my country of domicile is India since I was born and lived a good 20 years there as well.

What are your intentions? Do you intend to spend the rest of your life living in the UK? Or do you expect to return to India to live at some time, for example on retirement?

Your domicile of origin appears to be India. I assume your parents are Indian. The question is whether, or not, you have done sufficient to have obtained a domicile of choice, a country somewhere here in the UK. England? Scotland? etc

How long have you lived in the UK?

[ukbalaji]

John : Thanks for your response. My intentions ? I really dont know myself. Generally speaking I dont like commitments, and I dont like to make very long term decisions. I dont think I will ever "intend" to settle down anywhere. I lived almost a decade in America and absolutely loved it there and never thought I would leave, but circumstances brought me to the U.K and I have been here now for 5 years.

I have a globally mobile career, and what I really want is to be a global citizen, have some kind of a world passport which will give me the freedom to to live and work anywhere as I please, without standing for "visa" in lengthy lines in the summer heat outside Western embassies in Indian metros. I know I dont want to go thru that treatment again. Some kind of a "world green card" is what I am after altho I guess I am dreaming .... The I.L.R is okay, but I cant work in E.U if I want to, and I dont have the freedom to go out of the U.K for 2 or 3 years without losing the I.L.R.

Yes I and my parents are Indian and I was born and grew up in India until I was 22 when I went to the U.S for higher studies.


JAJ : Thanks for your informative response. Much appreciated. Also wanted to reply to couple of other points you made.

> Why fiscal advantage over British citizenship

I understand citizensip is an emotional issue for many people, however I think of myself as a world citizen, and at the end of the day, countries are just man made borders. I spent around 22 years in India, almost a decade in the U.S and about 5 years in the U.K, so I dont particularly feel any sentimental emotional ties to any one particular country. But if citizenship of one country is going to make me poorer, I would at least think twice before becoming a citizen.

> my own view is that it is not really acceptable that permanent residents of the United Kingdom - who have full access to British healthcare, education and social services

I see your point, but I can only speak for myself. I have not claimed a penny in benefits in the U.S or U.K, nor do I ever intend to. I dont want to rely on the state pension nor do I want to even claim it. I went to the NHS a single day in the last 5 years. I am single and at my age and with my busy career it is not easy to find a partner and I have come to accept that I will probably be single forever and probably wont have children who will go to free state schools.

Let me just say that I have contributed way more than my fair share of taxes, I would even go to the extent of saying it is high income single earners like me who contribute heavily to Gordon Brown's socialist state. But hey you cant escape death and taxes so I am okay with it and do pay my full 40% tax of course on my U.K salary and investments.

But my concern was regarding my other investments, in the U.S for instance. This was money *earned* in the U.S and never brought into the U.K. I do pay U.S tax on these which is well below 40%. I dont see *any moral obligation* whatsoever in paying 40 bloody % tax on these to the U.K. Why the heck should I ? There is no moral justification whatsoever. If other British Nationals in the same boat as me (with investments abroad) are coerced into doing so by Gordon Brown's socialist state, I would say it is unfair to them. But because they are getting robbed by nanny state does not mean I should be robbed as well.

[JAJ]

I lived almost a decade in America and absolutely loved it there and never thought I would leave, but circumstances brought me to the U.K and I have been here now for 5 years.

I have a globally mobile career, and what I really want is to be a global citizen, have some kind of a world passport which will give me the freedom to to live and work anywhere as I please, without standing for "visa" in lengthy lines in the summer heat outside Western embassies in Indian metros. I know I dont want to go thru that treatment again. Some kind of a "world green card" is what I am after altho I guess I am dreaming

You are dreaming, sorry. No such thing as a "world passport" or "world green card".

Did you not get a US passport when you lived in America so long?

.... The I.L.R is okay, but I cant work in E.U if I want to, and I dont have the freedom to go out of the U.K for 2 or 3 years without losing the I.L.R.

So it may be time for you to decide whether you want to make a commitment to the United Kingdom as your home.

But if citizenship of one country is going to make me poorer, I would at least think twice before becoming a citizen.

If you must think that way, then do a calculation to evaluate how much a British passport will help you in your career/life (global travel etc) and then set that against the loss of non-domiciled status in the UK.

You might be able to keep your status and naturalise as well - but don't count on it!

You will of course lose your Indian citizenship if you become British, but that may not be a problem for you. You may be able to obtain a PIO Card or overseas citizenship of India.

I see your point, but I can only speak for myself. I have not claimed a penny in benefits in the U.S or U.K, nor do I ever intend to. I dont want to rely on the state pension nor do I want to even claim it. I went to the NHS a single day in the last 5 years. I am single and at my age and with my busy career it is not easy to find a partner and I have come to accept that I will probably be single forever and probably wont have children who will go to free state schools.

Let me just say that I have contributed way more than my fair share of taxes, I would even go to the extent of saying it is high income single earners like me who contribute heavily to Gordon Brown's socialist state.

Sorry, the system doesn't work like that. As a member of the British community you should be willing to recognise the importance of providing for those in the community who are perhaps less fortunate than you are.

And you have the assurance that should you fall ill, for example, the NHS will be able to look after you. Not every country can give this assurance to its residents.

The privilege of living in a developed country like the United Kingdom is not one that you should take lightly. Yes, it comes with a tax burden - but if your net income is your sole priority and you are as mobile as you suggest, then perhaps if you feel taxation is too high it may be time to find an alternative jurisdiction.

You don't need to go far - the Isle of Man offers lower taxes with British citizenship attached, for example, provided you can get a work permit. Or try Switzerland (a lot easier with a British passport).

And if you decide to remain in the United Kingdom, then British citizenship gives you the full right to become involved in the public affairs of the nation and perhaps seek to put right what you feel needs changing. There are many legitimate questions that can be asked about the fiscal policies of the current government. But at the same time, maintenance of the NHS and the social safety net is the settled will of the British community and these would persist under any future government (just as with every previous government since the 1940s).

But my concern was regarding my other investments, in the U.S for instance. This was money *earned* in the U.S and never brought into the U.K. I do pay U.S tax on these which is well below 40%. I dont see *any moral obligation* whatsoever in paying 40 bloody % tax on these to the U.K. Why the heck should I ? There is no moral justification whatsoever. If other British Nationals in the same boat as me (with investments abroad) are coerced into doing so by Gordon Brown's socialist state, I would say it is unfair to them. But because they are getting robbed by nanny state does not mean I should be robbed as well.

Emotive language does not alter the fact that in most western nations - including the United States, Canada, Australia and New Zealand, permanent residents are taxed on worldwide income.

If a future British government did remove "non-domiciled" concessions, or if you lost your non-domiciled status, you would probably have to pay a lot less than 40% on your U.S. investments because you would probably obtain a credit for foreign tax suffered.