The High Court upheld a decision of the special commissioners ((2006) Sp C 568) that a taxpayer had failed to establish on the balance of probabilities that he had abandoned his domicile of origin in England and acquired a domicile of choice in the Seychelles. Moreover, on the evidence, he had been resident and ordinarily resident in the UK during the relevant tax years.

Facts

The taxpayer appealed against a number of assessments, amendments to self-assessments and notices which related to the tax years 1992–93 to 2003–04 concerning his liability for income tax under Sch. D, Case VI under ICTA 1988, s. 739–746 (relating to the transfer of assets abroad) and/or ICTA 1988, s. 660A-660G (relating to settlements and the liability of the settlor).

It was agreed between the parties that the issues of the domicile, residence and ordinary residence of the taxpayer should be heard as preliminary issues. It was the taxpayer's case that he abandoned his domicile of origin in England and acquired a domicile of choice in the Seychelles in 1976 and that he had retained that omicile of choice ever since. He argued that there had been no home in the UK available for his use when it had been rented out and relied upon the facts that he had built a plastics factory in the Seychelles and had notified the Inland Revenue and the Bank of England that he was non-resident in the UK. Further, in the early years he had spent several months in the Seychelles each year and only a number of days in England.

The Revenue's case was that the taxpayer had never abandoned his domicile of origin. He had bought a house in the Seychelles and built a plastics factory there in order to obtain a residency permit, but the quality of his long established ties with the UK, his continued residence in the UK, together with his regular visits to the UK all established that he remained domiciled in the UK.

The special commissioners concluded that, on the facts, the taxpayer had failed to discharge the burden of proving that he had abandoned his domicile of origin and the standard of proof was the balance of probabilities ((2006) Sp C 568). The taxpayer appealed.

Issue

Whether the taxpayer was domiciled in England, resident and ordinarily resident in the UK in the relevant tax years.

Decision

Lewison J (dismissing the appeal) said that, in the light of the commissioners’ findings of fact, it was impossible to say that the only true and reasonable conclusion was that the taxpayer acquired a domicile of choice in the Seychelles in 1976. That was a possible conclusion but, having heard all the evidence, it was not one to which the special commissioners had come. Considering the lengthy and meticulous way in which the special commissioners had evaluated the evidence in order to come to their conclusions, there was no error of law and whether the court thought that there might have been an error of fact was beside the point.

It was important to remember that a person always had to have a domicile and that he might only have one domicile at a time. It followed, therefore, that there would (at least in theory) be a particular moment in time at which his domicile changed if he acquired a domicile of choice which replaced his domicile of origin. Before that moment, his domicile would have been his domicile of origin. After that moment it would be his domicile of choice. Locating the moment might be a difficult question of fact. A person who retained a residence in his domicile of origin could acquire a domicile of choice in a new country only if the residence established in that country was his chief residence. Conduct which took place after the date of the alleged acquisition of a domicile of choice was relevant to determining the character of a person's residence. The question whether a person's residence in a particular territory was his chief residence was a question of the character of his residence in that territory.

In order to determine a person's intention at a given time, regard might be had not only to conduct and acts before and at the time, but also to conduct and acts after the time, assigning to such conduct and acts their relative and proper weight and cogency. In addition in the present case it was necessary to give some further consideration to the concept of chief residence. If the fact finder was required to determine which of two residences was a person's chief residence, the tribunal had to look at the evidence over a more prolonged period than might otherwise be the case. The legal issue before the special commissioners was whether the taxpayer was domiciled in England during the years of assessment under appeal. The factual issue was whether the taxpayer had acquired a domicile of choice in the critical period.

Although everyone had to have a domicile at any given time, the domicile of origin would endure or revive, even if the person did not have a chief residence in his territory of origin, or indeed anywhere. The question for the special commissioners was not which of England and the Seychelles was the taxpayer's chief residence; but whether his chief residence was in the Seychelles, which was a different question. Moreover, a residence did not cease to be a person's chief residence simply because it was let out. If a person domiciled in England took a foreign posting for, say, three months and let out his English home in the meantime, it was no misuse of language to say that his English home remained his chief residence during that three-month period.

The quality of intention that was necessary to support the acquisition of a domicile of choice was the same quality whether the person was single or married. The quality of intention was that he must have the intention of establishing himself and his family (if he acquired one) in a new territory. In determining whether at any given time the person did have that quality of intention, it was legitimate to examine what in fact happened when the person did acquire a wife and family.

It was for the special commissioners to decide, as part of their fact-finding exercise, whether the evidence of witnesses helped them to decide the questions they had to consider. It was here, in particular, that even the most meticulous of fact finding tribunals could not be expected to set out all the evidence that they heard. Moreover, the taxpayer's criticisms had understated the extent to which the special commissioners had decided that certain evidence was unfounded.

Chancery Division.
Judgment delivered 13 November 2007.