ACCA Advanced Taxation (ATX) Practice Exam

Who does the status 'deemed domicile' apply to for Income Tax and Capital Gains Tax purposes?

1. Only long-term residents

2. Only formerly UK domiciled residents

3. Both long-term residents and formerly UK domiciled residents

4. Only foreign residents

The correct answer is: Both long-term residents and formerly UK domiciled residents

The status of 'deemed domicile' applies to both long-term residents and formerly UK domiciled residents for Income Tax and Capital Gains Tax purposes. In the context of UK tax law, an individual can be classified as deemed domicile if they have been a resident in the UK for a certain number of years (specifically, 15 out of the last 20 tax years) or if they were born in the UK with a domicile of origin in the UK but now live overseas. This classification allows the individual to be subject to the same tax obligations as those who are actually domiciled in the UK. Therefore, for income tax and capital gains tax, they will be taxed on their worldwide income and gains, similar to UK-domiciled individuals. The idea behind this status is to ensure fairness in taxation, particularly for those who have significant connections to the UK, either through long-term residency or previous domicile status. This treatment is designed to prevent an individual from avoiding tax obligations by simply residing in another country while still maintaining significant ties to the UK. In summary, deemed domicile is a crucial concept that encompasses both long-term residents who meet the criteria and those who previously had a domicile status within the UK.