HMRC successfully challenge a living taxpayer’s domicile position
The importance of actions and actual events at a given point in time, rather than simply stated future intentions.
Status of longer-term UK resident non-doms
The First-tier Tribunal has released its decision in Coller v HMRC, which is another recent example (following the Henke case in 2020) of HMRC successfully challenging a living taxpayer’s domicile position. The case concerns the issue of the acquisition of a UK domicile of choice over two generations. It highlights the importance of the actions of the relevant parties rather than simply stated intentions, the number of links retained to the country of their domicile of origin and that later events should be taken into account when discerning someone’s intention at a given point in time. It also highlights the need for taxpayers to understand the impact of their actions and proactively manage their domicile position, as well as ensuring they understand the likely evidence requirements should they be subject to HMRC scrutiny in the future.
The case concerns a taxpayer, whose father had an Austrian domicile of origin but had fled Nazi occupied Austria in the 1930s and lived in the UK until his premature death at the age of 50. Despite his father’s non-UK domicile of origin, the Tribunal concluded that the taxpayer’s father had acquired a domicile of choice in the UK by the time of his birth having had a settled intention to remain in the UK, such that the taxpayer would have acquired a UK domicile at birth.
Notwithstanding this, the Tribunal also concluded that the taxpayer would nevertheless have acquired a domicile of choice in the UK by the relevant date under review. This was based not just on the length of time he had spent in England, but also on the quality of that residence - having been born here, established a family here and having no home elsewhere, the Tribunal concluded that was a strong starting point when considering the question as to where he intended his residence to be on a permanent and indefinite basis.
Although the case is fact specific, there are many facts and arguments put forward by the taxpayer which are analogous to facts and circumstances we see in similar cases, and the case provides a useful insight into HMRC’s approach with regards to domicile.
Like the Henke case in 2020, the judgment considered all evidence but concluded that witness statements, including those from the taxpayer, could be viewed cautiously as self-serving and that the actions taken were a far more reliable indication of intention. An important reminder to taxpayers of the importance of documenting intentions, but then ensuring that their actions suitably align.
In addition, emphasis was made in the judgment that a domicile of origin, whilst usually hard to displace, is considerably lessened where the individual in question has few, if any, links or attachments to the country of his domicile of origin. Individuals should therefore apply reasonable scrutiny to their position before they assume their domicile of origin holds.
Depending on what happens next (i.e. whether we see an appeal to this decision), this may result in more challenges by HMRC to taxpayers in similar cases. We have continued to see a steady increase in domicile enquiries being raised by HMRC, often in respect of those longer-term UK resident taxpayers and one area often challenged is the actions and events that will lead them to leave the UK permanently and the evidence available to support these intentions, looking at evidence throughout the period of time they have lived in the UK. Collating and retaining contemporaneous evidence over a period of time is therefore vital.
Given the degree of scrutiny HMRC apply to their enquiries into domicile status, this case offers a further reminder to individuals relying on a claim to be non-UK domiciled to keep their domicile status under review and ensure that their intentions, however long-term, are also put into action to help evidence their plans to live outside the UK permanently and indefinitely. We can help clients to both understand their position and support them in obtaining and retaining appropriate evidence in support of their domicile position.