There have been three decisions of the Special Commissioners recently that, while not strictly probate cases, are of interest to practitioners in the area.


Death and domicile



Gaines-Cooper v Revenue and Customs Commissioners (2006) 9 ITLR 274, [2006] UKSPC SPC00568 is an important case on residence, ordinary residence and domicile.



The appellant had calculated the number of days he spent in the UK between 1992/93 and 2003/04 on the basis of the principles set out in the Revenue & Customs' publication, IR20 Residents and Non-Residents - Liability to Tax in the United Kingdom. He therefore ignored dates of arrival and departure in the UK and also ignored unusual events. As far as the days of arrival and departure were concerned, many of the days he spent in the UK were single days (where arrival was one day and departure was the next), and which, therefore, he did not include at all in his figures.



The Revenue argued that if one ignored both the dates of arrival and departure and also single dates, a distorted picture emerged. It maintained that if the appellant arrived in the UK on one day and left the next that visit should count as one day, and its prepared figures counted nights spent by the appellant in the UK.



The commissioners did not ignore the days of arrival and departure in the UK, but counted the nights actually spent in the UK. They also counted as single nights visits that began on one day and ended on the next.



In determining whether the appellant was domiciled in the UK during the relevant period, the burden of proof was on him to show that he had lost his domicile in England and Wales and acquired a domicile of choice in the Seychelles; the standard of proof was the balance of probabilities, bearing in mind that unless the commissioners were satisfied by evidence of change, the domicile of origin persisted.



They reviewed the legal authorities and concluded that a domicile of choice was acquired by the combination of residence and the intention of permanent or indefinite residence. In reaching a decision, it was necessary to look at the totality of the evidence, including events that occurred after the claimed acquisition of a domicile of choice. Residence for the purposes of the law of domicile meant physical presence as an inhabitant. Where a person resided in two countries, it was necessary to look at all the facts in the light of the principle that 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 new country was his chief residence.



There also had to be the intention of permanent and indefinite residence &150; a determination to make the alleged domicile of choice his home, with the intention of establishing himself and his family there and ending his days in that country.



Applying those principles, the appellant had always retained a house in the UK and that was where his family lived; nearly all of the appellant's connections with the UK were located in a comparatively small area; the 1999 will was prepared by English solicitors and was to be governed by English law; the son's guardians lived in the UK; the appellant had always retained British citizenship and did not apply for citizenship in the Seychelles; and his wife applied for British citizenship. Therefore, the appellant had not established a change in domicile.



Down on the farm?



The case of Executors of Lady McKenna v HMRC [2006] STC (SCD) 800 is bad news for taxpayers seeking agricultural relief on farmhouses.



David McKenna and his wife Lady Cecilia Elizabeth McKenna lived at Rosteague House, Cornwall, which was surrounded by farmland. Mr McKenna died on 29 January 2003 and Lady Cecilia died on 16 June 2003. The executors argued that the house was a farmhouse and, therefore, entitled to agricultural property relief.



The Revenue maintained that the property was not a farmhouse; even if it were, then it was not of a character appropriate to the agricultural land. And, in any event, it was not occupied for the purposes of agriculture throughout the period of two years, ending with the relevant dates of death. The Revenue won comprehensively.



The most significant part of the decision was that the property was not a 'farmhouse'. The commissioner considered the meaning attributed to the word in the decision of the Lands Tribunal in Lloyds TSB Private Banking Limited as personal representative of Rosemary Antrobus deceased v Peter Twiddy [2005] DET/47/2004 (Antrobus 2) and agreed with it, stating that 'the principle that the farmer of the land is the person who farms it on a day-to-day basis rather then the person who is in overall control of the agricultural business conducted on the land is a helpful principle'. Mr McKenna had not farmed on a day-to-day basis. He had employed a manager.



The commissioner also agreed with the Revenue that the house was not of an appropriate character. It was larger than most farmhouses in the area and the interior was not similar to that of a typical farmhouse. The size of the house was not proportionate to the land being farmed.



Moreover, the property had not been occupied for the purposes of agriculture throughout the period of two years, ending with the relevant dates of death. The McKennas had died in their 90s, and in poor health. It was clear that neither were able to engage in farming matters throughout the period ending with their deaths.



Property investment



Executors of Phillips (deceased) v HMRC SpC [2006] STC (SCD) 639 is a slightly surprising decision, and potentially good news for investors in property.



P Ltd was established in 1958 and its principal object, set out in its articles of association, was to acquire land and buildings for the purposes of investment only and with a view to receiving income.



By April 1989, the owner of the company (the deceased) decided that P would not invest in any other property but would only make loans to other related companies. Those loans financed the purchase by the related companies of investment property, were repayable at will and were informal in character. P did not acquire any formal charge over any property or take a floating charge over the property of the borrowing company, and it always charged it interest at 2.5% above base rate.



On the deceased's death, the Revenue argued that his shareholding in P was not relevant business property because the business carried on by the company consisted wholly or mainly of making or holding investments.



The commissioner considered that P did not make or hold investments - it made informal loans to its related companies and money lending was not normally regarded as investment. P was in the business of making loans and not in the business of investing in loans.