What does ‘domicile’ mean?
Every person has a domicile at all times throughout their lifetime, starting with a domicile of origin at birth, which is usually the domicile of the person’s father. Once an adult, an individual's domicile will change only if they move country and intend to live in that country permanently or indefinitely. An individual will acquire a domicile of choice in that other country if both elements are present. A domicile of origin is reactivated if a domicile of choice is lost.
The benefits of ‘non-domiciled status’ are a long-standing and attractive feature of the UK tax system.
Demonstrating a domicile outside the UK
HMRC may enquire into a person’s non-UK domiciled status during their lifetime or following their death, and are doing so increasingly.
Whether making a claim for non-domiciled status, undertaking tax and succession planning on the basis of a foreign domicile or responding to an enquiry, the starting point will be the details of the person’s origins and of any moves between countries during childhood. This is often difficult to establish because of the passage of time. The intentions of the person’s parents can be relevant. Capturing the information in writing, accurately and in a timely fashion, can be crucial.
The second stage is to demonstrate that the person has not acquired a domicile of choice in any part of the UK. This depends on the person's intentions. However, external evidence should be used to demonstrate those intentions; a mere statement of an intention will be viewed critically. Relevant evidence would include:
- the location (and use) of property and other assets;
- business, charitable and other interests;
- the locations of family members;
- social connections; and
- burial wishes.
Mr Evert Henkes v HMRC
In this recent 2020 case, the First-tier Tax Tribunal passed judgment on Mr Henkes’ domicile. HMRC accepted that Mr Henkes had a domicile of origin outside the UK (either in Venezuela or the Netherlands), but argued that he had acquired a domicile of choice in the UK.
The following facts and issues were examined:
- Mr Henkes had lived in the UK for roughly 40 years. Previous cases show that the length of residence in the UK is not, of itself, conclusive evidence that a domicile of choice has been acquired, but it is a factor.
- Since arriving in the UK in 1967, Mr Henkes had worked abroad, but he had maintained ties and a property in the UK, and had returned to the UK after each period abroad.
- Mr Henkes was not attached to either Venezuela or the Netherlands. Whilst he had a property in Spain, the judge was not convinced that he would leave the UK to settle there. Mr Henkes’ stance on this was undermined by inconsistences in correspondence with HMRC. The judge said that the question is not whether he had a strong attachment to a jurisdiction other than the UK, but whether he intended to remain in the UK permanently. However, the lack of connections to another country “affects the interpretation of his intentions as regards the UK”. This reminds us of the importance of evidencing strong, emotional links outside the UK.
- Mr Henkes had a settled, UK-centric life. His wife, his wife’s family, their children and grandchildren all lived in the UK. The judge found this to be a reason why he would stay in the UK indefinitely.
- A point of significance was the question of when Mr Henkes would leave the UK. He said he would leave the UK on retirement, but again the judge found there were inconsistencies in how this had been articulated to HMRC. In addition:
- The judge did not think it necessary for him to be in the UK for work, so questioned whether this was a reason for his continued presence.
- As he was still working at the age of 75, the judge said it was so unclear as to when, if ever, he would retire, that this was no more than a “vague aspiration” and it was feasible that it would never happen.
- His wife was reluctant to leave the UK. There was a suggestion that he would not therefore leave the UK until after her death, even if he retired earlier.
Taking all of the evidence into account, the tribunal held that Mr Henkes had acquired a domicile of choice in the UK; the UK was his “ultimate home”.
This case highlights, in particular, the need for all surrounding facts to support a person’s stated intentions.