Relocating incapacitated family members to the UK

When a family member living overseas loses mental capacity, bringing them back to the UK often feels like the right thing to do. But it can trigger complex and unexpected tax consequences.

Families in this position often want to be closer so they can help with care and decision-making. Before a move is made, however, it’s important to understand how UK tax rules may apply and what issues should be considered.

UK tax residence

The UK takes a formulaic approach to tax residence through the Statutory Residence Test. This is based primarily on the number of days, technically midnights, an individual spends in the UK, together with their connections to the country.

Many expatriates plan their UK visits carefully to stay below the thresholds that would trigger tax residence. An unplanned or permanent return to the UK can therefore create unwelcome tax complications.

The Statutory Residence Test is a relatively blunt tool and doesn’t contain specific concessions for individuals who lack mental capacity. As a result, relocating an incapacitated family member to the UK is likely to make them UK tax resident.

The test does include an ‘exceptional circumstances’ rule, which can offer partial relief for people who find themselves in the UK due to circumstances beyond their control. In practice, this relief is usually applied where a taxpayer is unable to leave the UK, rather than where they have returned. In our view, it’s unlikely to assist where a family member is repatriated to the UK due to incapacity.

Consequences of becoming UK tax resident

• Worldwide income and gains fall within the scope of UK tax
• Income and gains generated overseas may be taxed on return to the UK, where the individual has been non-resident for five years or less
• Worldwide assets fall within the scope of UK inheritance tax once the individual becomes a long-term resident, broadly meaning they have been UK resident for 10 or more of the previous 20 tax years.

Domicile and long-term residence

Domicile was removed from most areas of UK taxation in April 2025 and replaced with the concept of long-term residence. Despite this, domicile remains relevant in several areas of UK law, including:

• Succession law, which determines the extent to which UK law governs a deceased’s estate
• Claims under the Inheritance (Provision for Family and Dependants) Act 1975, where only estates of individuals who died UK domiciled can be challenged
• Certain double tax agreements, including those with the US, South Africa and India, where non-domiciled status can still produce significant tax benefits.

Everyone has one, and only one, domicile at any given time. At birth, a person acquires a domicile of origin, usually their father’s domicile, or their mother’s if the parents were unmarried.

While a person is a minor, they have a domicile of dependency, which follows that of the relevant parent.

As an adult, a person can acquire a domicile of choice by living in a new country and intending to remain there permanently or indefinitely. If that domicile of choice is later abandoned without a new one being acquired, the domicile of origin will revive. For a domicile of choice to be lost, both residence and the intention to remain indefinitely must come to an end.

How does incapacity affect the loss of a domicile of choice?

Where an adult loses mental capacity, the general rule is that they retain the domicile they held at the point capacity was lost.

For example, a UK-born individual who moves to Spain, acquires a Spanish domicile of choice and later loses capacity before being brought back to the UK would retain their Spanish domicile of choice. Although they’re now resident in the UK, they never lost the intention to remain in Spain and so their domicile of choice continues.

The reverse can also apply. A UK-domiciled individual who has lost capacity will not be able to acquire a new domicile of choice, even if they are permanently relocated overseas.

In many ways, this rule is helpful. Returning a family member to the UK should not affect any benefits they may have under a double tax agreement, nor should it expose their estate to claims under the Inheritance (Provision for Family and Dependants) Act 1975.

Practical points to consider

If a family member living abroad is losing mental capacity, taking advice as early as possible is strongly recommended. Relocating them to the UK can significantly affect their income tax, capital gains tax and inheritance tax position.

There may also be knock-on implications for trusts or companies they have established. In some cases, careful planning and the timing of return to the UK can mitigate these consequences.

Similarly, individuals who are retiring overseas should consider what they would want to happen if they were to lose capacity in the future and ensure their tax and estate planning reflects this possibility.