Determining domicile
Allen v HMRC [2005] WTLR 937; Perry v IRC [2005] WTLR 1077


Questions of a deceased's domicile are important both in determining liability of an estate to inheritance tax and to the possibility of a claim being made against the estate under the Inheritance (Provision for Family and Dependants) Act 1975.


In Allen v HMRC [2005] WTLR 937, the deceased had been born in England in 1922. Between 1953 and 1982, she and her husband had lived abroad as a result of his job for an oil company. They did not own a house until 1982 when her husband retired and they bought a property in Spain. They were both involved in local activities and visited the UK infrequently.


In 1994, they considered moving to the UK but decided against it. In 1975, the deceased was diagnosed with Parkinson's disease, and in 1996 her husband died unexpectedly.


The deceased brought her husband's ashes back to the UK to be interred in his parent's grave and she stayed with her half-sister and brother-in-law (her only family). She described herself as a visitor and played no part in the running of the house. She retained her house in Spain in a constant state of readiness for her return. She kept her principal investments and bank accounts outside the UK.


Her health deteriorated during 1997 and it was clear that she could not live alone. She needed residential care (to which she was adamantly opposed) or carers. Her half-sister and brother-in-law acted as carers. She visited Spain whenever she could and, when she did so, ran the house. However, her visits ceased after1999 owing to her deteriorating condition.



In June 2001, to relieve the strain on her half-sister and brother-in-law, the deceased bought the adjoining house, intending to have it converted to her needs. She made the purchase on the basis that, if the arrangements proved unsatisfactory, she would sell the house. It was not seen as an irreversible decision. She was admitted to hospital in February 2002 and died in August 2002.


It was agreed that she had acquired a domicile of choice in Spain. The question was whether she had abandoned it and acquired a new domicile in England and Wales. The burden of proof was on the Inland Revenue (as was). It was necessary to prove that the deceased had both ceased to reside in Spain and ceased to intend to reside there permanently or indefinitely.


The special commissioner found that the Revenue had not proved this. Significant points were: the deceased had lived the whole of her married life outside the UK; she had retained a residence in Spain until her death, although she could not be said to reside there once her visits ceased; however, she retained the intention to return to Spain if possible and her actions preserved the possibility that she might be able to return there with her half-sister and brother-in-law as carers.




Re Nathaneal, Cyganik v Agulian [2005] WTLR 1049


This case concerns an Inheritance Act claim.


Mr Nathaneal was born in Cyprus. In 1958, he came to England to escape an arranged marriage and stayed for 12 years. He returned to Cyprus to live permanently, but after the 1974 Turkish invasion came back to London.


His parents and other family remained in Cyprus and he sent his daughter to live there. He built a successful bed-and-breakfast hotel business in London. He lived in a two-room apartment and acquired no personal possessions here. When he died his business assets in the UK were worth £6.5 million; he had assets in Cyprus of £1 million, and a Guernsey bank account containing £401,000.


In 1992, he formed a relationship with the claimant who was Polish. They lived together as man and wife. In 1995, he made a will leaving her £50,000 and the bulk of his property to his daughters and granddaughter. From 1999, he allowed the claimant to consider herself his fiancée. Over a period of two years ending in 2002, he renovated a flat with a view to using it at weekends with the claimant. In 2002, they consulted a Roman Catholic priest about marriage. He died in 2003.


The court found that the evidence of intention was conflicting. Mr Nathanael had a strong emotional attachment to Cyprus and a strong sense of Greek Cypriot identity. The mother of one of his daughters gave evidence that she always felt he might return to Cyprus at any moment. There was no evidence that he had abandoned his domicile of origin in the period 1974 to 1992.


However, the court found that the position changed as a result of his relationship with the claimant. Had he not formed the relationship, he might well have returned to Cyprus. But, as a result of this successful relationship, his intention and his behaviour adapted over time to his circumstances. At some point between making the will in 1995 and when the claimant understood him to make a commitment to marriage (1999), the line was crossed and the deceased formed the intention of residing in England and Wales 'permanently or indefinitely'.




Property in joint names

Perry v IRC [2005] WTLR 1077


This case is an example of the Revenue successfully seeking to tax the whole value of property in joint names (as in Re Sillars [2004] SWTI 900). The special commissioner found that the deceased had put £1 million into an Isle of Man bank account in joint names with the appellant.


This was intended to be a gift from the deceased to the appellant of the balance for the time being in the account. However, the deceased had a general power to dispose of the money in the account as he thought fit.


Section 5(2) of the Inheritance Tax Act 1984 provides that where a person has such a power the whole value of the property is to be treated as part of that person's estate for inheritance tax purposes. As the surviving joint tenant, the appellant was liable for the tax on the account as a person in whom the property is vested under section 200(1)(c) of the Act.


The special commissioner also found that the deceased had reduced the value of his estate by granting the appellant a licence to occupy rent-free a property he owned. This was a transfer of value and the appellant as transferee was liable for the tax.


By Lesley King, College of Law, London