As you will be aware, there have been a number of recent changes to the tax rules for the non-domiciled, deeming domicile in certain situations.
However, the concept of domicile is more of a legal concept than a tax concept but can have significant consequences. In one recent case, the Group Chief Executive of HSBC is fighting information requests from HMRC for the last 20 years trying to establish his domicile!
In another recent case, the taxpayers’ appealed against HMRC determinations that they had all been domiciled in the UK since birth. The parties agreed that the appeals could be determined by reference to the question of if the taxpayers’ grandfather had acquired a domicile of choice in Brazil when the he was born. If he had not had not, then he would have had a UK domicile when the taxpayers’ father was born, which would have resulted in the taxpayers’ father obtaining a domicile of origin on his birth. That in turn would have resulted in the taxpayers obtaining a domicile of origin in the UK when they were born, in which case the appeals would be dismissed.
The Tribunal accepted that when the taxpayer was born the taxpayer’s grandfather had been living continuously in Brazil for around two years and was happy living there, having recently married a Brazilian woman. However, the Tribunal noted that at the time of the marriage the taxpayer’s grandfather could not have lived in Brazil for more than 18 months and was dividing his time between Brazil and Argentina. The Tribunal noted that the taxpayer’s father was a gregarious person who had made friends within the local community and was prepared to contribute to it.
The Tribunal considered that two year’s residence in Brazil was too short a time to form a settled intention to reside permanently there and that the taxpayer’s grandfather needed to earn a suitable income to support his family. The company he worked for required him to return to London which the taxpayer’s grandfather did because job opportunities in Brazil were not good. The Tribunal suggested that when the taxpayer was born the taxpayer’s grandfather’s intention was not to reside in Brazil permanently and he could not have been sure of a central factor that would need to be present to enable the taxpayer’s grandfather to settle in Brazil.
The Tribunal stated that the fact that the taxpayer’s grandfather held his main bank account in Brazil was not surprising that he lived there and his conversion to Catholicism demonstrated attachment to a faith that could be practised anywhere and did not suggest an intention to live permanently in Brazil.
The Tribunal concluded that the taxpayer’s grandfather had never acquired a domicile of choice in Brazil and therefore the taxpayer’s domicile of origin was in the UK and the children were domiciled in the UK.
So granddad affects me! A warning that you may wish to consider for any clients claiming to be non-domiciled.