Domicile enquiries – an update

An individual's domicile position can have a material impact on how they are taxed in the UK, and HMRC is increasingly focusing on individuals’ claims to have kept their foreign domicile.

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Simon Jennings
Published: 11 Sept 2020 Updated: 13 Apr 2023

The concept of an individual’s domicile is a complex area that can have a material impact on how they are taxed in the UK.

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An individual can only claim a continuing foreign domicile where they do not have the intention to remain permanently or indefinitely in the UK. Long term residents, or those who appear to have settled in the UK, are increasingly seeing their foreign domicile claims challenged by HMRC.

HMRC domicile enquiries can be complex, intrusive, expensive and take a long time to resolve, often asking for detailed information which can span decades. Individuals will need to be able to explain their presence in the UK and point to consistent evidence of a foreseeable contingency which would result in their departure from the UK.

Ultimately, domicile is a matter of fact to be determined by the Courts. A recent First-Tier Tribunal (FTT) decision is helpful in holding that the Tribunal can determine domicile in the context of a closure notice, so potentially speeding up the resolution of cases hinging upon this issue. Unfortunately for the taxpayer, the FTT went on to find that he had acquired a domicile of choice in the UK.

In Henkes v HMRC [2020] UK FTT 159 (TC), HMRC had enquired into Mr Henke’s domicile status in two tax years. It issued an information notice to obtain details of his worldwide income and gains for those years to determine the tax due. The taxpayer appealed the information notice and made an application for HMRC to issue closure notices to end its enquiry. The FTT considered that it had jurisdiction to determine the question of domicile as a prelude to deciding on the application for a closure notice and the appeal against an information notice.

Domicile position

The taxpayer, a UK resident in his seventies with a non-UK domicile of origin, contended that he intended to leave the UK for his second home in Spain on retirement, or on the death of his wife. He was married to a British wife, and their children and grandchildren were UK resident.

He had been UK resident for nearly 50 years and appeared to have no clear date in mind when he would retire or leave the UK. His wife was said to be reluctant to emigrate, although he claimed that this would not prevent his departure on final retirement. He had acquired a substantial property in Spain containing many of his possessions, but it was not clear whether or not he intended to move there permanently. It was accepted that he had a foreign domicile of origin, but it was uncertain whether this was in Venezuela or the Netherlands. He had not retained meaningful links with either country.

The FTT found that:

  • his chief residence was in the UK; the FTT considered that his Spanish property was more a holiday home than a residence, despite other social connections there;
  • the crucial point was whether or not he had formed an intention to live in the UK permanently or indefinitely but in deciding that, it was necessary to look at the strength of attachments elsewhere. He had links to Spain but had not evidenced a firm decision to live in Spain rather than some other country. His retirement date was uncertain, and it was unclear if retirement or his wife predeceasing him was going to be the catalyst for his departure;
  • taking these factors into account, along with the length and quality of his residence and family connections in the UK, the FTT considered that HMRC had demonstrated that he had acquired a UK domicile of choice.

Significant points to note

1. Future domicile decisions may be quicker as the FTT considered it has jurisdiction to decide the issue in the context of a closure notice. This does however conflict with the decision in Levy v HMRC [2019] UKFTT 418 (TC), where the FTT found that it only had to assess whether or not HMRC’s view on domicile had some merit.

2. While a change of domicile is a matter for the party asserting change to demonstrate, all factors need to be examined and the adhesive character traditionally associated with a domicile of origin may not be as significant as thought, especially if ties with that country are minimal.

3. For non-UK domiciled individuals who come to the UK:

  • the longer they remain in the UK without having clear plans as to when they will leave, and possibly where they will settle, the greater the risk that they could be held to have acquired a UK domicile of choice;
  • their intentions and supporting factual evidence are crucial. If their behaviour implies an intention to live in the UK permanently or indefinitely, they will have acquired a UK domicile of choice. The decision demonstrates that the Courts will look at overall behaviour and evidence as to whether lifestyle and current plans support any contention of a clear point of departure.

4. Statements made by the individual in question should be approached with care and examined critically in the light of conduct and actions.

Ref: NTEH70920106

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.