This isn’t something which will affect many people around Carlisle, but let’s just explain it in a light-hearted way. Suppose that you are a prince in a country where alcohol and gambling are illegal. The night life is dull, so you head for London and take up residence in a hotel in Soho. While you reside in the UK, dividends from any British shares which you happen to own are taxed in the usual way, just like one of the natives. If you die in this country, then assets which you own in this country are assessed to inheritance tax, but assets which you own abroad escape the inheritance tax net. This is the privilege of being non-domiciled.
If you were domiciled here, assets both here and in other countries, including the country where you were a royal, would be assessed to inheritance tax, leading to a much larger bill. Some politicians want to abolish non-domiciled status, which would deter foreign royalty from taking up residence here.
Here we have a basic question which is outside the scope of my expertise as an accountant. Do we want His Royal Highness blowing his money in our casinos, or should he go elsewhere? Do we want some people living here to have tax privileges which the rest of us do not have? Many non-domiciled persons residing here are not just playboys, but make a strong constructive contribution to our economy. What do we want?
Suppose we accept that non-domiciled status is legitimate and the prince can claim it. Could he subsequently lose it by making a donation to a British political party, becoming a director of a British company, joining our House of Lords by inheritance, claiming a Jacobite peerage, becoming an officer in the British Army or Colonel-in-Chief of a British regiment, or anything else which indicates that he is really one of the natives?
As well as inheritance tax privileges, the non-domiciled person only pays income tax on British income plus foreign income remitted to the UK. The domiciled person pays income tax on all worldwide income, with relief for double taxation.
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