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Domicile question is key to tax enquiry

In his first-tier tribunal (FTT), the judge had to decide if he could or should determine whether the taxpayer had acquired a UK domicile, before ruling on the validity of HMRC’s information notices.    

28th Aug 2020
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Former Shell executive Evert Henkes (TC07645) had filed his tax returns on the basis that he was domiciled outside the UK, so any non-UK sourced income not remitted into the UK had no relevance to his UK tax liability.

HMRC argued that Henkes had “probably” acquired a UK domicile at some stage, which would imply that his offshore income was very relevant to his UK tax position.

The FTT was tasked with deciding:

  • Should HMRC close its ongoing enquiries into Henkes’ 2015 and 2016 tax returns?
  • Was information concerning Henkes’ global income “reasonably required” for the purpose of checking his tax position, as per information notices issued under FA 2008, Sch 36?

The hearing, before Judge Tony Beare, split into two distinct halves.

First half

The judge pointed out there was two alternative outcomes:

  1. If Henkes was not UK-domiciled then the enquiries should be closed without the need for any amendment to his self-assessments, and the appeal against the information notices should succeed.
  2. If Henkes was UK-domiciled HMRC should be entitled to continue with their enquiries and the appeal against the information notices should be dismissed.

HMRC tried its uttermost to prevent the judge from ruling on Henkes’ domicile status. It robustly challenged whether Judge Beare could (and, if so, whether he should) make such a ruling.

Could he make a ruling?

The judge’s conclusion was that the FTT certainly does have the jurisdiction to make a ruling on Henkes’ domicile at this stage of proceedings, rather than push the question back to a later stage (at an appeal against HMRC’s amendment to the self assessment).

Should he?

The judge considered whether he ought to exercise that jurisdiction, and was convinced that he should for these reasons:

  • The question of domicile in this case is a “succinct, knockout point”;
  • It is capable of being decided at a relatively short hearing;
  • Its answer will deftly resolve the question of reasonability on both the closure notices and the information notices;
  • Its resolution will “significantly reduce the time and cost of disposing of the application and the appeal”.

What is Henkes’ domicile?

Henkes was born in Venezuela in 1943 to a father who was domiciled outside the UK. He holds Dutch citizenship and has never applied for UK citizenship.

He moved to London in 1967, where he worked for the Shell Group until 2003. He has owned three UK properties where he has lived with his British wife and their three children. His children and his seven grandchildren all live near him in the UK – he sees the grandchildren two or three times a month.

He and his wife own a substantial property in Spain, where significant personal property and two cars are kept permanently. The family stays there regularly – but mainly in the holiday times of August, Christmas and Easter. Most of his free time is spent at the London home.

Since his retirement from Shell, he has continued to work as a non-executive director, on company boards in Finland, Singapore, the USA, China and Russia. His stated intention is to leave the UK when he finally retires, although his pattern of taking on new non-exec posts suggests he may never truly “retire”.

His wife does not wish to leave the UK.

The judgment

To have acquired a UK domicile of choice Henkes must, at some stage prior to 2013/14:

  1. Have had his only or chief residence in the UK; and
  2. Have formed the intention to remain in the UK indefinitely.

The evidence for 1) was clear, as the Spanish house was either merely a holiday home or at best a second home.

For the second point the judge was able to draw some conclusions:

  • Henkes’ domicile of origin is probably in Venezuela. However, his attachments to Venezuela appear to be weak or non-existent.
  • His attachments to the UK are extensive and deep. It does not appear that necessity of work is all that keeps him here.
  • He has no strong attachment to any other jurisdiction. There is the house in Spain, but this appears to be little more than a holiday home. In his evidence Henkes said “he had no preference as to where he died, although, were he to contract a serious illness, he would prefer it to be in Spain”.

All the evidence pointed to a conclusion that Henkes has put down permanent roots in the UK, and has not done enough to acquire newer roots elsewhere.

The decision

Henkes has, at some stage prior to 5 April 2014, become domiciled in the UK. For that reason, HMRC does have reasonable grounds to continue the enquiries into his 2014/15 and 2015/16 tax returns.

For that same reason, the information concerning his worldwide income is reasonably required to check his tax position.


Truly this was a game of two halves. For the first half, HMRC strove mightily to prevent the judge from making a domicile ruling. Yet in the second half, when he did, it turned out to be a ruling HMRC was very happy to hear.

In March 2019 the taxpayer’s advisers had asked the FTT to judge the domicile question under the provisions of TMA 1970 s 28ZA (which requires a joint application by both parties), but HMRC refused. What a wasted opportunity!

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