Foreign domicile changes tax rules on offshore assets

Q&A: Dominic Coyle

Will a man living in Ireland but with assets in, and a pension  from, the UK – and  who pays tax to HMRC – be included in any offshore investigation by Ireland’s Revenue?

Will a man living in Ireland but with assets in, and a pension from, the UK – and who pays tax to HMRC – be included in any offshore investigation by Ireland’s Revenue?

 

You have been writing recently about Revenue’s clampdown on offshore assets. I am a pensioner living in Ireland after a lifetime working in Britain, where I was born. My pension comes from the UK and I also have a property and bank accounts there. My children still live in the UK.

I am not an Irish citizen and I pay tax to HMRC. I am wondering if will be included in any investigation by Ireland’s Revenue, and, if so, why?

Mr NC, Dublin

Tax is one of those funny areas – at least, it’s not funny per se but there are all sorts of fiddly rules and regulations regarding who is liable to what.

However, one of the primary considerations in determining liability to tax is the notion of tax residence. Related to this is the concept of domicile.

Tax residence is fairly straightforward. You are tax resident generally in the country in which you live. That generally means you are liable in that country for tax on your worldwide income from all sources.

Where a local jurisdiction also deducts tax – on property or foreign earnings for instance – there are a series of agreements between states to ensure that people are not taxed twice on the same income or gain, known commonly as double taxation agreements.

Bringing money into Ireland

Where things get a little more complicated is when domicile comes into the picture. Domicile is not a black-and-white issue. In general, but not exclusively, a person’s domicile will be determined by the country in which they are born or the domicile of their parents. For instance a child born to an Irish soldier serving abroad will be deemed to have Irish domicile, not that of the country in which they are actually born.

You can change domicile but not willy-nilly. For instance, if someone born in Ireland and of Irish domicile emigrates to the UK and makes their life there, they could reasonably change their domicile from Irish to British.

In your case, as someone born in the UK and having worked there and made your life there until you moved over here in retirement, your domicile would reasonable be assumed to be British. Thus your primary liability will be to Her Majesty’s Revenue Commissioners (HMRC) as you state.

It is worth noting that, while citizenship can point to domicile, it does not determine it. It’s perfectly possible to be a British citizen with Irish domicile and vice versa.

The importance of this is that someone like you, who is tax resident in Ireland but not domiciled here, is liable to Irish Revenue only on money earned and assets owned in the State. So you are not liable to Revenue clawback on bank accounts, property or even pensions earned in the UK, unless you bring the money into Ireland.

However, any funds that are brought into Ireland will become liable for assessment by the Revenue in that tax year. This is known as the “remittance basis” of assessment.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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