Although the General Election creates tax uncertainty, it appears that the very “sticky” concept of domicile for Inheritance Tax (“IHT”) purposes will disappear.

The likely move to one of counting years of tax residence will provide welcome simplification.

The General Election also gives a chance for the professional bodies to comment. A useful summary update from the Chartered Institute of Taxation (“CIOT”) is as follows (with our highlights in bold):

“CIOT supports a change to a residence based test from a domicile based test however they consider that ten years residence for arrivers to the UK is too short a period for full exposure to IHT on their worldwide assets. They also feel that a ten year tail for leavers is too long and should be related to the length of residence in the UK.

Consideration will need to be given to treaties and treaty relief; in particular whether domicile in a tax treaty should be interpreted as residence.

There will be many transitional issues that will need careful thought including provisions surrounding different types of leavers and arrivers.

A key issue will be the issue of settlements and the CIOT supports the idea that their chargeability should be governed by the residence to the settlor. In respect of existing settlements, they support the grandfathering rules which were proposed at Budget 2024 to allow settlements existing before that date to retain their existing IHT treatment. They do not support grandfathering for assets settled on or after 6 March 2024 (budget day) unless made by Will.”