Coller v HMRC: Actions Speak Louder Than Words

• Law Firm: Maurice Turnor Gardner
• Subject Matter: Litigation, Mediation & Arbitration, Tax, Trials & Appeals & Compensation, Inheritance Tax, Income Tax, Capital Gains Tax
• Author: Ms Alice Gardiner
• Published date: 25 May 2023

While the concept of acquiring a domicile (deemed) after 15 tax years of UK residence is familiar to many, it is vital that common law domicile is not overlooked.

The recent judgement (all 57 pages of it) of the First-Tier Tax Tribunal delivered by Tribunal Judge Nigel Popplewell in Jeremy Coller v HMRC ¹ provides an excellent reminder. Briefly, the facts were that Mr Coller claimed, for the purposes of claiming the remittance basis of taxation, that he was not domiciled in the UK ² by virtue of his parentage. All domicile cases are, by their very nature, fact specific but the Tribunal Judge went above and beyond to provide a thorough exposition of the law of domicile in his application to Mr Coller's life history and addressed a number of issues which often arise in such cases.

What is domicile?

The common law concept of domicile stands alone from citizenship, tax residence or habitual residence. In very general terms, domicile can be described as an individual's permanent home.

Of course, domicile means different things to different people in different locations. For example, in French, "domicile" translates as "home" (which is its natural meaning in English, too and one reason why it is open to being misunderstood) and so it is understandable that the UK's concept of domicile could easily become blurred with tax residence. This, coupled with the fact that domicile is not a concept that exists under many jurisdictions, can mean that uninitiated foreign advisors are often not alive to its complexities and risks.

Back in the UK, in many cases, an individual ³ is domiciled where their father's domicile was at the time of their birth. This is referred to as an individual's 'domicile of origin.'

There are two further types of domicile - a 'domicile of choice' and 'domicile of dependency.' A domicile of choice can be acquired where an individual has actual residence in a new jurisdiction and has an intention to live there permanently or indefinitely. Once acquired (and crucial for the case in question), a domicile of choice will displace a domicile of origin.

A domicile of dependency applies only to unmarried children under the age of 16. In this instance, an individual will have a domicile which generally follows that of their father until the child reaches 16.

The common law concept of domicile should not be confused with the statutory concept of deemed domicile. In 2015, the general election brought about tax reforms which were implemented from 6 April 2017. From this point, an individual was treated as deemed domiciled when they have been UK resident for at least 15 of the 20 tax years ⁴. What is vital to bear in mind however, is that a common law domicile of choice can be acquired well before 15 years have elapsed, and this can have significant inheritance tax (and other) implications.

In the absence of a statutory test for domicile, landmark domicile cases such as this are vital in demonstrating to practitioners how HMRC might assess domicile.

Why does domicile matter?

An individual's domicile can be a crucial...