Scrapping the non-domicile rule – effects on divorce 12 Apr 2015
Ed Miliband has said Labour plans to end the non-domicile rule that allows some wealthy UK residents to limit the tax paid on earnings outside the country.
Many people do not know that where you got married is irrelevant to where you get divorced. The country in which you are allowed to divorce in (and therefore the divorce laws that apply) is governed, in European Member States, by Article 3 of Council Regulation (EC) No.2201/2003 (“Brussels II Revised”) and states that
1. Jurisdiction for divorce lies with the Courts of the Member State in whose territory:
– Both spouses are habitually resident, or
– the spouses were last habitually resident, insofar as one of them still resides there, or
– the Respondent is habitually resident, or
– in the event of a joint application, either of the spouses is habitually resident, or
– the applicant is habitually resident if he or she resided there for at least a year immediately before the application was made, or
– the applicant is habitually resident if he or she resided there for at least 6 months immediately before the application was made and is either a national of the Member State in question or, in the case of the UK and Ireland, has his or her “domicile” there;
of the nationality of both spouses or, in the case of the UK and Ireland, of the “domicile” of both spouses.
2. For the purpose of this Regulation, “domicile” shall have the same meaning as it has under the legal systems of the UK and Ireland.
It should be noted that:
– Denmark opted out of this Regulation. Thus Forum disputes involving Denmark have to be treated in the same way as forum disputes involving non-EU countries in Europe and the rest of the world – which is a topic outside the scope of this article.
– The Isle of Man and Channel Islands are not considered part of the UK for the purposes of the Regulation (although Gibraltar is).
– The Regulation does not apply to Civil Partnerships – there is a separate law governing jurisdiction to end Civil Partnerships.
There have been a number of cases in the Family Courts determining whether a spouse is or is not domiciled in England and Wales, for example, Ray v Sekhri in the High Court in July 2013 and In the Court of Appeal in February 2014. This case goes into some detail about the acquisition of domicile and is a useful summary. It is a complex area. If a person is considered in English law to have his or her permanent home here, then s/he is in general domiciled here, although there are exceptions. Every person at birth has a domicile of origin but that can be replaced by a domicile of choice. Domicile of choice is a combination of residence and an intention of permanent or indefinite residence.
Under the proposed changes, if the tax authorities do not accept a spouse’s domicile of choice (or origin) and determine it to be England and Wales, it remains to be seen whether this could have repercussions for divorce and how the interplay between tax law and divorce law will be interpreted. It may lead to more wealthy individuals and their spouses being able to divorce here and it is likely to lead to more contested cases on the complex area of domicile.