A recent inheritance tax case is a reminder to taxpayers to tread carefully when it comes to their domicile status.

In Shah v HMRC [2023] TC08842, the First-tier Tax Tribunal (FTT) threw out an appeal by Ameet Shah (AS) – an executor of the estate of Anantrai Maneklal Shah (AMS) – against a notice of determination.

AS argued AMS – who was born in Karachi – wasn’t domiciled in England and Wales at the time of his death. But the FTT concluded AMS had acquired a domicile of choice in England and Wales and hadn’t abandoned this before his death.

The dispute is a reminder to taxpayers to be prepared to have their entire lives put under the microscope as part of a domicile status tax case. They should therefore consider their position carefully and have suitable evidence to back up their stance.

Shah v HMRC tax appeal background

  • Anantrai Maneklal Shah was born in 1929 in Karachi, which at that time was in British India and is now in Pakistan.
  • AMS’ parents had married in Karachi in around 1926. They then moved to the country now known as Tanzania.
  • Around 1954, AMS moved to the UK to study pharmacy at university in Sunderland. After graduation in 1957 he returned to live in Tanzania.
  • AMS married in 1960 in Mumbai, India. He continued to live in Tanzania with his wife. They had a daughter, born in 1961, and a son (AS), born in 1964. When Tanzania became independent from the UK in 1961, AMS gained British citizenship.
  • In 1972, he and his family moved to Mumbai.
  • About a year later, AMS moved to the UK. His wife and children followed a few months later.
  • AMS worked as a pharmacist from his arrival in the UK. He bought a pharmacy business in 1975 and acquired the freehold of the shop in 1981. He sold the business in 1994 and then worked as a locum pharmacist until at least 1997.
  • AMS’ daughter died in 2009, and his wife died in 2010.
  • AMS sold his house in 2010. He moved into a rented flat in London, and in 2012 moved into a London flat that AS bought as an investment.
  • In 2014, AMS made two wills: one under UK law for UK assets, and one under Indian law for non-UK assets.
  • AMS died on 7 June 2016.

The domicile of choice dispute

AS argued his father hadn’t gained a domicile of choice in England and Wales as he’d always intended to return to India. It was claimed he’d left India in 1973 because he was unable to find secure employment there and had discovered employment prospects were much stronger in the UK. And it was put forward that he planned to return to India at the end of his working life in the UK.

HMRC, meanwhile, argued AMS had gained a domicile of choice in England and Wales at some point after 1973 and hadn’t abandoned it by the date of his death.

The task for the FTT was to make a global assessment of all the relevant facts of AMS’ life to decide his intentions, based on the balance of probabilities.

There are no statutory provisions that set out the circumstances in which a person acquires a domicile of choice. It’s a matter that has been the subject of considerable case law.

The decision

Balancing AMS’ long residence in England with his connections to India, the FTT ruled AMS had gained a domicile of choice in England at some point after 1973. Any intentions he had to move to India were at best vague. There was no evidence to suggest he had a clear plan to move on retirement.

The appeal was therefore dismissed.

Domicile of origin issue

The parties also made submissions regarding AMS’ domicile of origin. HMRC argued AMS had a domicile of origin in Pakistan, and AS contended AMS had a domicile of origin in India.

But the FTT felt it didn’t need to address the issue further because there is a relevant inheritance tax (IHT) double tax treaty with both India and Pakistan.

Our thoughts

Domicile is a complex area of UK taxation and seems to be constantly evolving.

Many taxpayers may have understood the rules when they first entered the UK and perhaps sought tax advice at that point.

But taxation changes at a fast pace and many of the older rules may now be out of date.

It’s crucial for anyone with complicated tax affairs, and who relies on domicile rules, to make sure they stay up to date with the changes. You should check every few years that whatever planning you put in place is still appropriate.

Domicile status tax advice

Our specialist tax consultants can help you with domicile issues and other complex tax areas.

We’re also experienced at handling HMRC tax enquiries and investigations on behalf of our clients. And we offer a tax expert witness service for solicitors and forensic accountants.

Contact our team on 07813 434195 or email: stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation