Many advisers have to grapple with the sometimes difficult question of establishing their client’s domicile. A client’s domicile is fundamentally important in a diverse range of English legal and tax areas, such as whether:
- a client can bring divorce proceedings in the UK;
- a client is liable to UK Inheritance Tax on worldwide assets as opposed to just UK situated assets (the latter applies to non-UK doms, actual or deemed);
- a claim can be made against the client’s estate following death – the Inheritance (Provision for Family and Dependants) Act 1975 only applies to the estates of UK domiciled individuals;
- a claim can be made for the favourable remittance basis of taxation, which is available to UK resident but non UK domiciled individuals.
How do you determine an individual’s domicile? Without delving into the law of domicile itself, about which much has been written elsewhere, one only has to look at case law in this area to see that all aspects of an individual’s life can be rummaged through in pursuit of the answer – it really is a case of ‘access all areas’. But advisers are rarely given the scope or time to conduct a review of their clients’ domiciles with anything approaching the rigour adopted by the court. Therefore it may be necessary to manage expectations in difficult-to-call cases. It may be necessary to state a level of confidence in the opinion provided.
Anyone doubting the level of detail into which HMRC will go in the event that an individual’s domicile is relevant for the purposes of assessing liability to UK taxes should look no further than the ‘Schedule of useful information and documents’ listed in HMRC’s Residence, Domicile and Remittance Basis Manual (at RDRM23080) and the 40 or so questions posed in there. Answers to these questions can be recorded in the form of a domicile statement. As I found in a recent case, these statements of intention, even if made several years before death, can still supply useful evidence to submit to HMRC if necessary.
Reported domicile cases often provide rich pickings for advisers (and would-be screenwriters perhaps, if only they knew…). They usually supply useful guidance on how to judge difficult cases, although inevitably each turns on its own particular facts. In the recent case of Proles v Kohli ( EWHC 767 (Ch)), the life of the deceased was examined in some detail to determine, as a preliminary matter, whether his minor child could claim some financial support from his estate under the 1975 Act on the basis that the deceased held an English domicile of choice, supplanting his Indian domicile of origin, at the time of his death. The claim was brought on behalf of the mother of the child and defended by the deceased’s estranged wife.
The case provided a useful reminder that to acquire a domicile of choice, there has to be actual residence in a country coupled with an intention to reside permanently or for an unlimited time in that country. However, the weight to be given to evidence of intention to reside can be hard to assess – in this case, the deceased ‘told different people different things’. Express declarations of intention (such as might appear in a Will) are not conclusive evidence of an individual’s domicile and the motive and circumstances of such declarations need to be weighed also. The judge noted that such statements can be ‘self-serving and [of] little weight…’ because there is usually an incentive, for tax or succession reasons, to take a certain domicile position. The mother of the child pointed to the deceased’s social, business and even his emotional connections in England, in contrast to his estrangement from his wife residing in India. It was noted that even though the deceased had connections to India – an Indian passport, ID card and a limited visa to live and work in the UK, none of those in themselves were inconsistent with a settled intention to remain in the UK.
As events turned out, the deceased died in India after spending the last few months of his life there and this founded the contention, by the deceased’s estranged wife, that the deceased had abandoned his English domicile of choice by the time of his death. Many people may choose to receive medical treatment in a different country, so this is probably not an uncommon occurrence. It did not sway the judge in this case, who noted rather usefully ‘….Where, for practical purposes, a person has no life left to live, then a decision to go to his/her country of origin to die, is not a decision to spend any significant part of one’s life (“the end of one’s days”) in that country – it is a decision that the specific event of his/her death should be in that country.’ The judge found that the deceased held an English domicile of choice at death and the 1975 Act claim could proceed.