In his Budget speech, Gordon Brown announced an overhaul of the UK’s definition of residence and domicile for tax purposes. Generally, a person’s domicile is acquired at birth and is the same as the father’s domicile. Domicile can be changed and a person can opt to take their mother’s domicile. However, regardless of where you are domiciled, your residency status and your nationality could be completely different.
The UK taxation system works on a person’s domicile whereas most other countries base tax on residency. In the UK, you only pay some taxes if you are domiciled in the UK or have lived in the UK for 17 years or more. If you are not domiciled in the UK but are a resident, you only pay tax on money remitted and spent in the UK.
The Government are consulting on these changes, together with proposed changes to the tax structure of offshore funds.