Navigating Domicile Enquiries: Recent Case Review

17 October 2023
Author: Helen McGhee

In recent months, the First-tier Tax Tribunal has presided over 3 headline grabbing domicile cases which, whilst offering little precedential value, set out some useful commentary on the multi factorial approach taken by HMRC and ultimately the tribunal in determining an individual’s domicile status. This note reviews the decisions made in Shah v HMRC [2023] UK FTT 539 (TC), Strachan v HMRC [2023] UKFTT 00617 (TC) and Coller v HMRC [2023] UKFTT 212 (TC).

Shah v HMRC [2023] UK FTT 539 (TC)

This case concerned an appeal against an IHT assessment raised by HMRC concerning the estate of Mr Shah. Mr Shah was born in Karachi in 1929, travelled back and forth to Tanzania to some extent over the years and then moved to the UK in 1973 where he lived until his death in 2016.

As the party asserting the change in domicile, HMRC had to prove their case (based on the balance of probabilities) that Mr Shah had acquired a domicile of choice in the UK contrary to what his executors claimed that Mr Shah had always been intent to return to India upon retirement.

The tribunal concluded that Mr Shah had settled and had the intention to remain in England permanently – he had acquired a domicile of choice here and any intention of moving back to India was described as “at best vague”.

Many factors contributed to this decision, including (but not limited to):

  • Mr Shah had no significant ties to India, having only visited twice for a period of three weeks over 43 years.
  • Mr Shah had no bank account or other assets or investments in India.
  • Despite a DOM1 form being completed, this was not submitted to HMRC at the time and the tribunal found it inconsistent with the evidence available.
  • There were multiple potential trigger points at which Mr Shah could have returned to India yet he remained in the UK.
  • The tribunal noted Mr Shah’s close attachment to family based in the UK, and it was considered to be ‘unrealistic’ for somebody of his age and health to relocate from a place with many family ties to a place which he had never lived in before.

This case is particularly relevant for long-term UK resident individuals who may hope to take advantage of a UK estate tax treaty (such as with Pakistan or India) to potentially limit their exposure to UK inheritance tax by virtue of non-UK domicile status.

Strachan v HMRC [2023] UKFTT 00617 (TC) 

Mr Strachan completed his self-assessment tax returns for the tax years 2011-12 to 2015-16 on the basis that he had abandoned his UK domicile of origin and had acquired a domicile of choice in Massachusetts. HMRC disagreed, and issued discovery assessments for the first four years, and a closure notice and amendment for the fifth year.

The judge held that: “Where a person has two homes (Mr Strachan still maintained his London residence), a domicile of choice can only be established in a jurisdiction if the person has his ‘chief’ or ‘principal’ home in that jurisdiction.”

Mr Strachan’s US home did not constitute his chief residence as it was used almost exclusively for holidays, and he did not move to Massachusetts until he was diagnosed with Alzheimer’s in 2020. HMRC asserted that he had stronger ties to the UK both through work and socially.

Importantly, it was further found that Mr Strachan had been “careless” as he had not taken any professional advice on his domicile status since 1987, and had assumed that he was domiciled in Massachusetts, when a reasonable taxpayer in his position would have taken new advice given the significant changes to his position during that time. It is vital to keep a domicile status under constant review. HMRC were unable to prove that Mr Strachan’s carelessness had caused a loss of tax thus his appeals were successful in part.

Coller v HMRC [2023] UKFTT 212 (TC)

The four main issues considered in this case were:

  1. At the time of his son’s birth in 1958, had Mr Coller’s father acquired a domicile of choice in the UK, thereby giving his son an English domicile of origin?
  2. If he had not obtained a domicile of choice in the UK at the time of his son’s birth, had Mr Coller’s father acquired a domicile of choice in the UK at the time of his death in 1968, giving his son an English domicile of dependency, which would have become a domicile of choice when he turned 16?
  3. After the death of Mr Coller’s father, had his wife acquired an English domicile of choice, in turn giving an English domicile of dependency to their son, as above?
  4. If the first three conditions had not been met and Mr Coller did not have an English domicile of origin or dependency, had he acquired an English domicile of choice himself?

The tribunal underwent a detailed forensic review of many years of Mr Coller’s family history before concluding that his father must have acquired an English domicile of choice prior to his son’s birth thus Jeremy also had an English domicile of origin. Thereafter the mother’s domicile was irrelevant albeit the tribunal commented upon such extensively.

Mr Coller had been educated in the UK and maintained strong social and philanthropic ties here. The tribunal considered that in the context of his wider circumstances his intention to ultimately relocate and settle in Israel upon his divorce in 2012 (despite significant real estate investments there) was not consistent with his life in London where his children were at school.

The cases provide useful commentary and insight into the approach the courts will take and certainly highlight that those seeking to maintain or establish any non-UK domicile status must ensure they have consistent evidence to support this. Vague statements of intent to settle elsewhere are of insufficient evidential value.

The issue of maintaining a non-UK domicile as a matter of law remains of vital importance to many still benefiting from trust protections. Any domicile enquiry can be protracted and emotionally and financially draining (expert advice is pivotal in managing the flow of information) and early and up to date advice is pivotal.

If you wish to discuss domicile or require assistance with HMRC enquiries, please contact Helen McGhee or Daisy Oliver at HMcGhee@jha.com DOliver@jha.com.

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