Writing for Taxation magazine’s Readers’ Forum, BKL private client tax specialist Terry Jordan answers a fellow professional’s query about an entrepreneur whose shock discovery that he was adopted calls his domicile into question.
The tax query
‘My client is a very successful entrepreneur and business adviser who has built an international career over many years. He was born in England to British parents and lived here as a child. He went to university in the USA and, since then, he has lived in many different parts of the world – never settling anywhere for long. He is currently back in England but this will probably only be for a few years before he is on the move again.
He and I have always worked on the basis that he has a UK domicile because his father and mother were domiciled here. Because he has never had a domicile of choice elsewhere, his domicile of origin in the UK (strictly England and Wales) has never been revoked.
His elderly parents have just died soon after each other and, in going through their papers, he has discovered to his shock that he was adopted at birth. His natural mother was a young French girl who got pregnant when she was in the UK for a one-year postgraduate course. He doesn’t know who the father is. He was given up for adoption almost immediately after his birth.
He has asked me whether this affects his domicile status. If he took his domicile status from his natural mother he would be domiciled in France and, as he has never put down roots in the UK, he would not have established a domicile of choice in England. So, is he a non-dom? I know that the importance of domicile in the UK tax system is diminishing and may eventually disappear, but he is anxious to see whether his newfound status as a non-dom (if that is indeed what has happened) can be turned to his advantage.
I’ve never come across anything like this before and I am at a loss to know how to advise him. Can readers help?’ Query 20,381 – Perplexed.
Terry Jordan’s reply: Domicile will cease to be relevant for tax purposes from 6 April 2025.
‘Perplexed says that his client was born in England to British parents, but it has transpired that was not the case. His natural mother was French, and it is implicit that she was not married when she gave birth to the client. His original domicile of origin was France.
Prior to 1 January 1974, it was the rule at common law that a minor, whether married or not, was incapable of acquiring by his own act an independent domicile of choice. (A female child who married before attaining the age of 18 acquired her husband’s domicile as a domicile of dependence and, if widowed, reacquired the domicile she had before the marriage.) The Domicile and Matrimonial Proceedings Act 1973 confined this rule to unmarried children under the age of 16.
Section 67 (1) of the Adoption and Children Act 2002 provides that an adopted person is to be treated in law as if born as the child of the adopters or adopter. HMRC’s Residence Domicile and Remittance Basis Manual at RDRM 22110 confirms that the result is the acquisition of a new domicile of origin.
On that basis the client is a ‘formerly domiciled resident’ as defined in IHTA 1984, s 272 who would be treated as deemed domiciled within the UK for inheritance tax purposes while tax resident here under s 267(1)(aa) even if domiciled elsewhere at general law. In practical terms, we are told that the client has never acquired a domicile of choice outside the UK which would have supplanted his ‘new’ domicile of origin.
As Perplexed says, under the current proposals, domicile will cease to be relevant for tax purposes from 6 April 2025 to be replaced by a residence test and more details are anticipated as part of the Budget on 30 October this year.’
The full article was published in Taxation magazine (issue 4951) and is available to subscribers here on the Taxation website.
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