Harry & Meghan ‘Requested To Vacate’ Frogmore Cottage – How Will This Affect Their Domicile Status?

It has been reported that Prince Harry and Megan Markle have been ‘evicted’ from their Windsor residence Frogmore Cottage meaning that it would be unclear whether he would have a permanent address in the UK moving forwards. Prince Harry and his family left the UK in 2020 to start a new life in California with his family.

How would this move and not having a permanent residence in the UK affect their domicile status moving forward?

What is domicile?

Domicile refers to the place where a person has their permanent home and residence and will, therefore, determine an individual’s liability to income tax, capital gains tax, and Inheritance Tax.

Your domicile’s usually the country you were born classed as your domicile of origin. You do not lose this status however, you can elect a domicile of choice if, for example, you have moved abroad and you intend to set up your permanent home there.

Inheritance tax and domicile

When a person passes away holding assets both in England and Wales and abroad, any Inheritance Tax due on the estate would be dependent on their domicile at death.

If they are deemed to be domiciled outside of England and Wales, assets held in another country would not be subject to Inheritance Tax in England and Wales. However, taxes may still be payable in the country in which those assets are held.

If no specific election has been made as to an individual domicile status, as in, if they elected a domicile of choice when moving abroad then evidence must be produced to deem their domicile at their date of death.

Did the individual intend to move abroad and stay there permanently? Where are all official documents kept such as birth certificates and passports? Where is the individual intended to be laid to rest after a funeral? Where is that individual’s Will held? If the individual was married, what was their husband’s domicile status? These are a non-exhaustive list of factors HMRC would take into account on a person’s domicile status on death.

Wills covering assets in both the UK and abroad

Not only is it important to establish domicile at death, if a person holds both assets in England and Wales and abroad, it is also important to have a carefully drafted Will to ensure the estate doesn’t fall foul of some country’s forced heirship rules. In Spain, for example, even if you have a surviving spouse,  under Spanish laws a testator is forced to leave two-thirds of their estate to their children.

EU Succession Regulation (known as Brussels IV) was introduced in 2015 which provides that the law that applies to your estate will be the law of your habitual residence.

Habitual residence is the country where your life is mainly based. Whereas domicile is the country where you have your closest ties and it is regarded as your permanent home. So if you live in England and have a holiday home in Spain a carefully prepared Will can elect that your estate and Will is governed by UK laws to ensure that your estate is passed in accordance with your wishes as opposed to those forced heirship rules.

If you prepare Wills in both England and another country you hold assets, it is important that the Wills are read together to ensure one doesn’t cancel the other.

It is important to obtain specialist legal advice to determine domicile status to ensure the correct tax is payable during someone’s lifetime and also on death. It is also crucial that domicile status is taken into consideration when drafting Wills.