A recent First Tier Tribunal (Henderson  UKFTT 0556 (TC)) has dismissed an appeal from four appellants that they were non-UK domiciled. The argument being run by the taxpayers was that their UK born grandfather (Ian) had acquired a domicile of choice in Brazil, resulting in their father (Nicholas) also having a non-UK domicile, that was then passed to the appellants.
The case required the Tribunal to consider 3 questions:
- Whether Ian had acquired a domicile of choice in Brazil by the time Nicholas was born (if not, he would have retained his UK domicile and Nicholas would have a UK domicile)
- If Ian had acquired a domicile of choice in Brazil by that point, was this abandoned before Nicholas turned 16 (in which case Nicholas would have a UK domicile of dependency)
- If Ian hadn’t abandoned his domicile of choice, so Nicholas was born with a Brazil domicile, had Nicholas acquired a domicile of choice in the UK by time the appellants were born.
The burden of proof for the first question fell on the appellants, for the remaining questions on HMRC.
Ian was born and raised in the UK to a UK domiciled father. He started working for the family business in 1960 and went on a 12 month assignment to Brazil. Shortly after his return to the UK, he returned to Brazil once again and married a Brazil national. Whilst in Brazil, Nicholas was born, in 1963. Under pressure from his family, Ian reluctantly returned to the UK in 1966 and acquired a home in Kensington. In 1974, he left the family company and set up his own business, but remained in the UK. Ian is now 87 and remains in the UK with his wife; he makes few trips to Brazil but is in regular contact with family and friends there.
Unsurprisingly in our opinion, the tribunal did not consider Ian had formed the intention to reside permanently or indefinitely in Brazil by 1963, primarily because his ability to earn a living relied on the family company, and he returned to the UK when requested in 1966. Furthermore, he did not return to Brazil when he had the opportunity to do so in 1974. None of this suggested that by 1963 he had made a settled intention to spend his life there.
Ian was therefore held to have a UK domicile at the point that Nicholas was born, meaning that Nicholas, and consequently the appellants, also had a UK domicile at birth.
Although the finding of the tribunal on question one rendered the other questions redundant, the Tribunal nonetheless noted that HMRC satisfied their burden on both points. On question 2, Ian’s ties with the UK by 1979 were much stronger and he had not taken the chance to move back to Brazil in 1974. On question 3, the fact that Nicholas had acquired two properties in the UK, sent his children to school in the UK and not left the UK when he left the army all pointed to an intention of residing in the UK permanently.
This is an interesting case, but not an unexpected outcome. What it does show, if anything, is that HMRC are prepared to argue at Tribunal that a non-UK domiciled taxpayer (or someone who claims to be) has acquired a domicile of choice in the UK, likewise they are reluctant to accept that a UK domiciled individual can acquire a domicile elsewhere – although admittedly the fact pattern in this case did little to help the appellants.