IHT: Determining deceased’s domicile of choiceby
Any legislation that is predicated on someone’s intentions is inherently flawed. The law’s interpretation becomes even harder when Inheritance Tax (IHT) is at stake and the individual involved is no longer with us.
That was the situation in the recent first tier tribunal case of Ameet Shah (as executor of the estate of Anantrai Maneklal Shah deceased) vs HMRC (TC08842).
The case arose as a result of HMRC’s refusal to accept that the late Mr Shah was not UK domiciled at the time of his death under the provisions of Section 221 IHTA 1984.
At stake was part of the inheritance tax due on an estate of £2.48m, comprising approximately £680,000 in UK assets and £1.8m in overseas assets. If the appeal was successful, the overseas part might escape a liability should it be established that the deceased was not UK domiciled.
This is one of those situations where there was little clear evidence, requiring the tribunal judges (Judge Anne Fairpo and Gill Hunter) to do their best to determine the individual’s intentions on the balance of probabilities, taking into account a set of conflicting facts. It is hardly helpful that there are no statutory provisions setting out the circumstances in which a person acquires a domicile of choice, only case law.
Broadly, this leads to a position where a domicile of choice will be acquired by a combination of residence in a territory and the intention to remain there permanently.
Shah was born in 1929 in Karachi, then in India but, after partition, in Pakistan. His father was born in Gujarat, which was and remains in India. Immediately before his birth, the family lived in Tanzania and he returned there to study.
He subsequently studied in the UK and acquired British citizenship seven years later as a Tanzanian resident.
The family resettled in India before moving to the UK in 1973, where they were joined by Shah’s mother. Thereafter he built a career in the UK as a pharmacist, retiring from full-time work in 1997 then working as a locum for a few years. Apart from relatively short breaks, he remained in the UK for 43 years until his death in 2016.
DOM 1 form
There was little documentary evidence except a form DOM1 prepared in 2011 by the Shah for his son, indicating the elder man’s belief that he had a domicile of origin in India. In line with current practice, this was not provided to HMRC, which many have long regarded as a weakness in the system.
The judges did not consider this form as “particularly reliable” since it contained inconsistencies and statements that might not have stood up to detailed interrogation, for example with regard to the availability of accommodation in India.
The FTT concluded: “Overall, we consider that the answers given on this form reflected answers that AMS thought would be helpful rather than being unequivocal statements of his intentions.”
The appellant’s submissions generally sounded weak, suggesting that Shah’s intention to retire to India was subverted by external circumstances, including the deaths of his daughter and wife.
Domicile of choice
HMRC’s review opinion was that he had acquired a domicile of choice in the UK and had not abandoned that by the date of his death. They also contended that his connections to India were weak and that he had several opportunities to make a permanent move there, each of which he failed to take, only visiting the country twice in the last four decades of his life.
The evidence that they sought will be of interest to those attempting to avoid establishing a domicile of choice in future. They noted his failure to read Indian newspapers or watch or listen to Indian media and also the fact that neither of his wills (UK and Indian) set out any Indian funeral arrangements or requests for a ceremony there. He also made no attempt to regain his Indian citizenship, which lapsed during his time in the UK.
The judges were swayed by his close attachment to family members in the UK and lack of connections in India, both of which gave little credence to the view that he was planning to resettle in the latter country, far from those close family members.
Demonstrating how tricky this legislation is to interpret, the judges were unable to conclude whether Shah had a domicile of origin in India or Pakistan but given that overall conclusion considered the question to be academic.
Although both parties were given the right to appeal, this is one of those cases where a reader looking at the information as presented in the legal report might very easily conclude that the plaintiffs were unwise to spend what might have been a substantial sum on legal advice and support in a situation where the evidence underlying their contentions appeared weak and was largely circumstantial.