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Settled status application? Did you consider your tax position?

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With the approaching end of the Brexit transition period; many people are now applying for settled status in the UK to ensure they have permission to live in the UK and travel freely.

Lisa Spearman raises a practical point to watch relating to your domicile status – even if you don’t currently use it for tax purposes.

Almost by definition, if you are applying for settled status you are likely to have come to live in the UK from elsewhere, and you could well be non-UK domiciled. In many cases, you may consider your domicile status to be academic since it may not be cost efficient, or you might have lived here for longer than 15 years, so are no longer eligible to use it for tax purposes. While it may not be on your radar, your actual domicile can matter in a variety of situations, as well as for tax.

For this reason, it is important to understand your domicile position and when it might have changed. In the broadest of terms, if you have decided to remain permanently in the UK, you may have become domiciled here. The matter is judged by looking at the entirety of your personal arrangements, and no single factor is a determinant on its own, however, it is undoubtedly the case that applying for settled status could be seen as an indication that you have decided to live here permanently.

Applying for settled status is an immigration law matter, and you are asking for permission to live in the UK. Brexit has meant many people have had to apply for settled status to avoid having to uproot their and their family’s lives. It does not necessarily mean that they have in fact decided to live permanently in the UK in the sense required for a change of domicile. However, while technically the immigration and tax rules are different as we have reported before, HMRC are challenging non domicile status more frequently, and often, more aggressively. Applying for settled status is clearly a factor on which HMRC may place a considerable emphasis when weighing up whether an individual could be said to have taken a UK domicile.

Practically then, we suggest that you use the review of your immigration status as an opportunity actively to review your domicile position. You should examine your intentions and realistic expectations as to your future plans. If you are not planning to remain in the UK forever, you should look at the links you have with your home jurisdiction and ensure these are valid, maintained and documented as are the circumstances in which you will leave the UK.

What would your answer be if HMRC were to ask why you applied for settled status? This is something worth considering. If it is simply a matter of ensuring you have immigration permission to be in the UK, it would be wise to record why you needed the status in a contemporaneous note (even if it is just a letter to your accountant).

If, on reflection, you believe that you have decided permanently to remain in the UK, it is best to recognise that fact and organise your affairs accordingly. The transition to a UK domicile has a number of implications you will need to note. A realistic assessment of your intentions will assist with accurate and reliable tax planning and reporting which means that even if you are subject to an HMRC enquiry you are well prepared to deal with it.

If you are uncertain about your position, or the implications of it, we will be happy to discuss this with you further. Please do get in touch with your usual Mercer & Hole contact or directly with Lisa Spearman.

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