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French Legal Issues
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 09/05/2008, 9:12
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Scooby
Joined on 25/09/2007
Peak District
Posts 298
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Re: Definition of 'domiciled'
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Domicile and situ of assets at the time of death are the relevant factors for UK IHT purposes. Your domicile (of origin) for UK tax purposes will be the domicile of your father. It used to be the case that a women took her husband's domicile on marraige but that has now changed. It is possible to change your domicile (domicile of choice) but as has been stated above it is not as simple as expressing an intention to move or, indeed, actually moving permanently to a new country. It is based on your circumstances - i.e. whether or not you can have been considered to have severed all ties with your domicile of origin. There is no statutory definition of 'domicile' so HMRC / the courts will look at a variety of facts when deciding on your domicile. If you retain any ties with the UK e.g.:
- have a residence in the UK
- keep other assets in the UK e.g. cars, boat, plane etc
- hold UK bank accounts
- retain membership of UK clubs or societies
- have business ties with the UK
- have close / dependant family members in the UK
- retain UK citizenship / a UK passport / driving licence
- have a burial plot in the UK...or have expressed an intention to be buried in the UK
- have a will that is written under UK law
- you cannot speak, fluently, the language of your country of chosen domicile
or you have only lived in you country of domicile of choice for a short time, then the UK tax authorities may consider you to continue to be domiciled in the UK even though you moved abroad before your death with the intention of living there permanently.
The burden of proof rests with the individual and HMRC will contest your domicile of choice on the basis of the above - particularly if your estate is of sufficient size to merit their interest.
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09/05/2008, 9:26
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Pickles
 
Joined on 23/08/2004
Posts 213
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Re: Definition of 'domiciled'
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 postie wrote: | | When applying for an IoM offshore bank account I was told that in "banking terms" - domiciled, means, where you are born!
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Yes, but you have to put this in context. The IoM bank was presumably dealing with you as a UK resident, in which case the UK HMRC's concept and definition of domicile applies. And technically, the IoM bank was oversimplifying: HMRC would consider your default domicile to be that of your father in the absence of other overriding information - hence if you were born in Bahrain to British parents, HMRC would consider you to be UK domiciled. In such circumstances, if you never set foot in the UK nor had financial interests there then the fact that HMRC considers you to be UK domiciled will never impinge on your life. If you are in France, then what matters to the French tax authorities is whether your primary residence is in France, and they apply tests such as;
Where do you spend the majority of your time? (which is usually the defining issue)
Where is the centre of your financial interests?
etc.
There are some wrinkles in the French system which apply to people just after they have arrived in France which mean that their treatment wrt certain types of tax liability is different to that which applies to someone who has lived in France all their life, as has been pointed out, but basically the French Fisc considers domicile to equate to residence, and if you are in France then what the French Fisc thinks, matters!
(edited) I note that Scooby has already clarified much of the above - I'm a slow typer ....
Regards
Pickles
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09/05/2008, 9:47
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Scooby
Joined on 25/09/2007
Peak District
Posts 298
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Re: Definition of 'domiciled'
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If it has not been made clear already, if you are considered to be domiciled in the UK then all your assets (whereever they are situated in the world) will be subject to UK inheritance tax.
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09/05/2008, 10:51
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Will
Joined on 22/09/2004
Sussex & 50 (Mortainais)
Posts 5,072
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Re: Definition of 'domiciled'
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Where this matter becomes relevant is if you are tax resident in France, but still have property and/or significant investments or financial interests in Britain. In this case, if you give up your UK domiciled status, then all your assets, worldwide, will be subject to French inheritance tax, which can be a bad move in financial terms (though might be advantageous for some).
If you retain UK domicile (particularly if you have dual residence status), and, most important, arrange things properly and legally, then it is possible to shelter your UK assets from the French tax. Though the French tax people may not always agree ![Wink [;-)]](/cs/images/emotions/wink.gif) as long as this is done within the provisions of the double taxation agreement you, or rather your heirs, will be OK. Of course, your French property will still be subject to French taxation and your UK assets will come under UK IHT. But this is often better than having the whole of your estate taxed in France.
In short, I agree with Scooby (and Pickles), with the proviso that it is rather difficult - if not impossible - to stop the French tax people applying French inheritance tax to houses and land situated in France. Which I am sure they said, but somebody who does not understand the double taxation arrangements might not realise. There are possible alternatives, including ownership of property through companies or trusts, but these can have negative tax implications in other respects, and trusts are not, as such, recognised in France. And of course, if you are UK domiciled, then you pay UK inheritance tax anyway - though under the double taxation agreement you should not be taxed twice. So there is no 'one size fits all' answer; it depends on so many variables, including the value of your estate, how many reserved heirs, etc etc.
Will
intentionally blank signature
http://www.vienormande.com
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09/05/2008, 15:03
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martyng
Joined on 21/04/2008
Hampshire and soon near Lalinde
Posts 18
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Re: Definition of 'domiciled'
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As the originator of this thread, regretfully I am still confused. Having read all the comments, which have been very useful and thought provoking, I then read the HMRC documents (thanks Will for pointing me in that direction). Although I appreciate HMRC rules apply only to UK situation, they state that ‘You are domiciled in the country where you have your permanent home. Domicile is different from nationality or residence.’ So with a permanent home in France, domicile is in France, n’est ce pas? The French would agree with that surely, and I would be subject to French IHT laws. But HMRC go on to say that ‘You can only have one domicile at any given time’, yet my domicile of origin is definitely in the UK, (born there, father etc.) and I will have dependants remaining in the UK, bank account etc.
Clear as mud!
But after all the legal discussion – with a fairly simple situation (married couple retiring permanently to France, sort succession so that assets go to other spouse, then equally to dependants) – financially in the long run is it going to be better to come under UK IHT rules or French? (Or is that too simplistic a question?)
Martyn
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09/05/2008, 16:34
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Will
Joined on 22/09/2004
Sussex & 50 (Mortainais)
Posts 5,072
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Re: Definition of 'domiciled'
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If your permanent home is in France and you have few, if any of the ties such as those mentioned by Scooby you can declare yourself to be French domiciled, in which case HMRC will not be interested. However, if the authorities in either country feel that you are attempting to evade taxation (rather than just avoid it, which is legal if done properly) they may investigate your affairs and deem the situation to be otherwise.
The problem is that French IHT is potentially very high, particularly for inheritors other than very close relatives, and the 'thresholds' are rather lower than in UK, and, indeed, in some cases don't exist at all. Whether your heirs would be better off or not if you were completely French domiciled depends on a number of factors, like the size of the estate, how much is 'fixed' property in either country, how many heirs, their relationship to you, etc etc. That's why I suggested your advisor, who obviously knows far more about your affairs and is better qualified than me, may be correct in so far as suggesting that you should think carefully about giving up UK domicile. I have to say that I have known Siddals and similar companies to offer poor - even totally incorrect - advice, so I wouldn't necessarily take what they say as being gospel truth, particularly if they don't have the complete picture.
Also the current HMRC IR20 booklet is an interim version, pending changes (although they shouldn't affect your situation) so there may well be inconsistencies. After all, as it says, there is no statutory UK legal definition of domicile, it merely follows what has been decided in various pieces of case law, so it is potentially an ever-changing concept.
This is the sort of question that can never be completely answered on a forum like this, but the discussion is of value if it suggests items you need to find out more about, or gives you questions to ask the real experts.
Will
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http://www.vienormande.com
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10/05/2008, 7:36
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NormanH
Joined on 10/04/2008
Posts 235
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Re: Definition of 'domiciled'
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Nothing to add technically to the sensible and informative posts of Will et al, but I have an observation.
A number of British people have been worried about the UK taxman for so long that they fail to be terrified of the French one.
In other words if you live in France forget British definitions.
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France Forum » Legal and Finan... » French Legal Is... » Definition of 'domiciled'
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