Henderson & ors v HMRC [2017] WTLR 949

Analysis

The appellants were the four children of Nicholas Henderson. They appealed under s42 of the Income Tax (Earnings and Pensions Act) 2003 and s207 of the Income and Corporation Taxes Act 1988, against HMRC determinations that they had all been domiciled in the UK since their birth. Strictly this appeal only related to tax years prior to 2008-2009, as a new statutory regime governs appeals relating to questions of domicile thereafter.

The parties were agreed that the appeals could be determined by reference to three questions:

1. (1) Had Ian Henderson (‘Ian’), the appellants’ grandfather, acquired a domicile of choice in Brazil when Nicholas Henderson (‘Nicholas’), the appellants’ father, was born?
2. (2) If Ian had acquired a domicile of choice in Brazil by the time Nicholas was born, did he abandon that domicile of choice (such that his UK domicile of origin revived) before Nicholas Henderson turned 16?
3. (3) If Ian had acquired a Brazilian domicile of choice by the time of Nicholas’ birth which he had not abandoned before Nicholas turned 16 so that Nicholas had a Brazilian domicile of origin, had Nicholas acquired a domicile of choice in the UK at the time of any appellant’s birth?

Nicholas gave evidence on behalf of his children.

The tribunal summarised the authorities on the law relating to the acquisition of a domicile of choice. Per Lord Westbury in Udny v Udny (1869) LR 1 Sc & D 44, there had to be a ‘residence freely chosen and not prescribed or dictated by external necessity’ and it must be residence fixed not for a limited period or particular purposes, but general and indefinite in its future contemplation’. The parties were agreed that:

1. (1) Any circumstance that is evidence of a person’s residence, or intention to reside permanently or indefinitely in a country, must be considered in determining whether that person has acquired a domicile of choice; and
2. (2) In determining whether a person intends to reside permanently or indefinitely, a court may have regard to the motive for which residence was taken up, the fact that residence was not freely chosen and the fact that residence is precarious.

In summarising the law relating to the abandonment of a domicile of choice, the judge noted that it was possible to abandon a domicile of choice without necessarily needing to show that a new domicile of choice had been acquired (the domicile of origin would revive). The absence of intention to return had to be unequivocal.

The judge then went on to consider the burden and standard of proof and other evidential matters. The statements or declarations of intention of the subject of a domicile dispute, or propositus, could be given in evidence by way of exception from the hearsay rule, but had to be carefully examined in all the circumstances as to the appropriate weight to be accorded to them. The burden of proof was on the person seeking to establish a change of domicile. The standard was the ordinary standard of the balance of probabilities. There was no separate free-standing rule of law as to the ‘adhesiveness’ of the domicile of origin such that particularly strong evidence was needed to establish the acquisition of a domicile of choice: dicta to that affect represented an approach to the ascertainment of facts based around the proposition that a person’s ‘native character easily reverts’. Per Arden LJ in Barlow Clowes, the acquisition of any new domicile should be treated as a serious allegation because of its serious consequences: however, the evidence required was a matter of common sense in the particular circumstances. Moreover, when it came to factual findings, ascertainment of domicile involved an analysis of events throughout a person’s life.

The tribunal then proceeded to make a series of findings of fact about the lives of Ian and Nicholas.

As to the questions of law, the tribunal held (per Judge Richards):

1. 1. The appellants had not discharged the burden of proof on them that Ian had acquired a domicile of choice in Brazil by the time of Nicholas’ birth. On the contrary, the tribunal was satisfied that Ian never acquired a domicile of choice in Brazil.
2. a) When Nicholas was born, Ian was residing in Brazil; however, he never formed the intention to reside permanently or indefinitely there.
3. b) Nicholas’ evidence satisfied the tribunal only that Ian was a gregarious person who made friends within the local community and was willing to contribute to it.
4. c) Moreover, two years’ residence (or three years if the temporary posting was counted) was too short a time for a young man such as Ian to form a settled intention to reside permanently there.
5. d) His intention needed to be considered in relation to his ability to earn suitable income to support him and his wife. The tribunal did not see how a young man who needed to work for a living could form a settled intention to reside permanently in a country unless he could be sure that he would be able to work and earn a suitable income there. Ian’s ability to work depended on the Company. He could therefore not have been sure of a central factor that would need to be present to enable him to settle in Brazil.
6. e) The other evidence in support of intention to live in Brazil permanently was either weak or equivocal.
7. f) There was no need to draw adverse inferences from Ian’s failure to attend for cross-examination: it was explicable.
8. 2. Given the tribunal’s view on the first issue, the second issue, as to whether Ian had abandoned any domicile of choice he acquired before Nicholas turned 16, did not fall for consideration. However, the tribunal commented that if Ian had acquired a Brazilian domicile of choice, then HMRC would bear the burden of proof on the second issue and would need to prove it accordingly.
9. a) On the first limb, Ian had ceased to reside in Brazil in 1966.
10. b) As to the second limb, given the reluctance to leave Brazil, the move to England did not of itself demonstrate an intention to cease to reside in Brazil permanently or indefinitely.
11. c) However, by 1979, circumstances were different. The tribunal took a rounded approach by considering events throughout Ian’s life. By 1979, Ian had already ceased to have any intention to reside permanently in Brazil.
12. 3. As to the third issue, which also did not need to be decided, the tribunal approached the third issue from the standpoint that Nicholas had a domicile of origin in Brazil when he turned 16. The tribunal considered that, even if Nicholas had a Brazilian domicile of origin, he lost it in 1993 at the time the Trust acquired the property in Chelsea Harbour.
13. a) The Trust had acquired two very desirable properties in the UK for the use of the Hendersons specifically.
14. b) Nicholas had actually resided in the UK since at least 1993.
15. c) Nicholas had chosen to send his children to English boarding school, and he clearly attached significance to living in the same country as that at which his children were at school.
16. d) When Nicholas left the army, he had a high degree of freedom. However, he strengthened his ties to the UK by embarking on expensive renovations to the Country House.
17. e) Any domicile of origin had an ‘adhesive’ quality. He would have obtained a Brazilian domicile of origin by his father living in Brazil for just five years. Therefore, it was not particularly surprising that Nicholas’ protracted period of residence in the UK involved him forming the intention to live in the UK permanently or indefinitely.
18. f) Nicholas’ evidence as to where he intended to reside permanently or indefinitely was confusing and contradictory.
19. g) Nicholas’ strong attachment to Brazil since 1993 was little more than an emotional fondness falling short of an intention to reside there permanently.
20. h) There was much more evidence of actions consistent with an intention to reside permanently in the UK that of actions consistent with an intention to reside permanently outside the UK.
21. 4. HMRC had correctly concluded that the appellant Henderson children were all domiciled in the UK from their birth. The appeals were dismissed.

DECISION [1] The appellants are the four children of Nicholas Henderson. They are appealing, under s42 of the Income Tax (Earnings and Pensions Act) 2003 and s207 of the Income and Corporation Taxes Act 1988, against HMRC determinations that they have all been domiciled in the United Kingdom since their birth. [2] The parties were …

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