Domicile determinations after Gulliver v HMRC

A case recently heard by the First Tier Tribunal, Gulliver v HMRC, suggests that self-assessment as non-UK domiciled may not be as secure as taxpayers suppose.
Mr Gulliver’s domicile had first been scrutinised by HMRC in 2002 when he transferred funds into a trust while living in the UK on a short-term secondment. The transaction would have generated a small Inheritance Tax charge had he been domiciled in the UK at that point. Mr Gulliver claimed that he had acquired a Hong Kong domicile by the time he made the transfer and HMRC eventually acceded this.

Mr Gulliver intended to return to Hong Kong following his secondment but business requirements caused him to remain UK resident.

HMRC again called into question his domicile position, this time through an enquiry into his 2014 Tax Return. Mr Gulliver argued that HMRC were bound by the consequences of their earlier finding in 2003 unless they could prove that he had finally abandoned his intention to return to Hong Kong. On this basis he sought, through the Tax Tribunal, to have the enquiry closed.

The Judge disagreed with Mr Gulliver and concluded that Income Tax and Capital Gains Tax are determined on an annual basis noting that “a determination of fact made in relation to one tax year is not binding in relation to a later tax year”.

In refusing to close the enquiry as Mr Gulliver requested, it is likely his domicile position will be subject to further investigation. It is clear from this case that taxpayers claiming to be non-UK domiciled should be prepared to justify their domicile status to HMRC on an annual basis.

It also remains to be seen whether this judgement will have wider implications in other areas of tax where HMRC has made a determination of facts, which it later decides to revisit.

This article was taken from the Autumn 2017 issue of the Private Client team's Quarterly Tax Digest. You can access all the other articles here.

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