Writing for Taxation magazine, BKL private client tax specialist Terry Jordan examines HMRC’s success in the Aubrey Weis case involving domicile status.
HMRC has recently had several successes challenging taxpayers’ assertions that at general law they were domiciled outside the UK. The latest reported case is that concerning Rabbi Aubrey Weis in the First-tier Tribunal (TC9463).
What is domicile?
Domicile is a concept of private international law that links a person to a particular territory and governs the validity of marriage, the effect of marriage on the proprietary rights of spouses, divorce and nullity of marriage, legitimacy, legitimation and adoption, and wills of moveables and intestate succession to moveables. (It originated in the Roman Empire so it’s one of the things the Romans did for us.)
A person can only have one domicile at a time. In simple terms, in England at birth a child takes its domicile of origin from the father if the parents are married and from the mother if they are not. If the domicile of the relevant parent changes while the child is under 16, the child will acquire a new domicile of dependency. From age 16, a child can acquire a domicile of choice in another territory by virtue of physical presence there with the current intention permanently to remain.
Until 1 January 1974 on marriage women took their husband’s domicile as a domicile of dependence. What Lord Denning called ‘the last barbarous relic of a wife’s servitude’ was abolished by the Domicile and Matrimonial Proceedings Act 1973. The domicile of origin is said to have an adhesive quality and will revive on the abandonment of a domicile of choice.
Historically an individual’s domicile was potentially relevant to their tax position in the UK. A non-UK domicile [non-dom] who was UK resident for tax purposes could be on the remittance (broadly speaking brought into the UK) basis of taxation of non-UK source income and gains. Inheritance tax [IHT] applied only to UK situs assets of non-UK domiciliaries.
A form of club membership fee in the shape of the remittance basis charge was introduced for long-term residents and a deemed UK domicile for inheritance tax applied to individuals who had been resident for 17 out of 20 years (15 out of 20 from 6 April 2017).
UK residential property was brought within the scope of inheritance tax regardless of how enveloped, eg in a non-UK company.
What happened in the Weis case?
The case concerned the domicile status of Rabbi Aubrey Weis for the tax years 2005/06 and 2007/08 to 2015/16. The income tax at stake was more than £6m.
The appellant was born on 9 December 1949 in the UK to parents who had arrived here from Europe shortly before the outbreak of the Second World War.
Rabbi Weis has lived most of his life in Manchester and is a British national. He visited Israel in 1963 and 1964 and studied there between 1967 and 1970. In 2000 he completed a DOM 1 and submitted tax returns on the basis that he was not domiciled in the UK. He built up a sizeable property empire which the case report says could now be valued at more than £1bn.
The appellant has been in poor health since 1990.
The appellant’s father came to England in 1938. He married in 1946 and naturalised as a UK citizen in 1948. He left the UK in 1972, received treatment for cancer in the USA and was granted a certificate of naturalisation there in 1982. The First-tier Tribunal [FTT] was unable to establish where he lived after leaving the UK.
The tribunal decided that the appellant’s father had acquired a domicile of choice in England no later than 31 December 1969. On that basis the appellant had either a domicile of origin or of dependency here.
The tribunal decided that the appellant had not acquired a domicile of choice in Israel when he was resident there for three or four months after reaching majority.
Had it been necessary, it would have decided that the appellant had acquired a domicile of choice in England.
What next?
In the Spring Budget last year, Jeremy Hunt adopted some of Labour’s proposals regarding non-doms and Rachel Reeves went further in her Autumn Budget on 30 October 2024.
Domicile is now relevant only in the context of the ten double taxation conventions between the UK and other territories governing UK inheritance tax and the foreign equivalent taxes. What matters now is length of UK residence under the statutory residence test for tax purposes with foreign income and gains being within scope after four years residence and non-UK assets falling within the scope of UK inheritance tax after ten years. No doubt more cases are pending where domicile is relevant to earlier tax years.
The Times on Saturday 5 April, under the heading ‘Wealth exodus wounds Treasury’, reported the case of Dr Ann Kaplan Mulholland who bought Lympne Castle in Kent and has since spent about £17m turning it into a tourist attraction. As reported, her main grievance with Rachel Reeves is that she is being forced to move to Italy and she doesn’t eat carbs.
This article was first published in Taxation magazine (issue 4981) and is available to subscribers here on the Taxation website.
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