Stuart Gulliver is the well-known Group Chief Executive of HSBC. His business career has seen him spend significant amounts of time living in the Far East and he claims to be domiciled in Hong Kong.
In enquiring into his 2013/14 tax return in December 2015, HMRC asked some questions about his domicile status, which was relevant to his liabilities to Income Tax, CGT or both. Specifically the questions were directed at two points in particular. First, whether Mr Gulliver (whose domicile of origin was agreed to be in the UK) had ever acquired a domicile of choice in Hong Kong; and if so, whether he had subsequently abandoned that domicile of choice such that his UK domicile revived.
The question of Mr Gulliver’s domicile had come up before. In 2002 he had made a transfer to a trust in circumstances that a small amount of IHT liability would have arisen if (and only if) he had been of UK domicile at that time. HMRC had confirmed in 2002 that no such liability arose and therefore by clear implication that Mr Gulliver was not of UK domicile at that time.
Thus when the 2015 enquiry was made, it was contended on behalf of Mr Gulliver that HMRC had previously determined that he had acquired a domicile of choice in Hong Kong and that they were “stuck with the consequences of that determination.” The contention was not, of course, that having made that determination HMRC were bound for ever afterwards to treat Mr Gulliver as domiciled in Hong Kong. That would clearly have been ridiculous. The contention was more subtle. It was that HMRC were not, in 2015, entitled to investigate whether Mr Gulliver had acquired a domicile of choice in Hong Kong (for that had already been determined in 2002). Thus any enquiry in 2015 could be directed only at whether that domicile of choice had subsequently been abandoned – for which, crucially, the burden of proof would fall on HMRC and not on Mr Gulliver.
Mr Gulliver lost. As the Tribunal said – “Income Tax and CGT are charged by reference to separate tax years. A determination of fact made in relation to one tax year is not binding in relation to another tax year. Both HMRC and a taxpayer are permitted to make arguments that call into question factual determinations made in respect of a different tax year”.
The principle is not limited to determinations of domicile status, but is much wider. In principle, for example, an activity can be agreed to amount to trading in one year and the same activity to be non-trading in another year. A property may be held as a matter of fact to be your main residence in one year and, on the same underlying facts, not to be your main residence in another year. Fortunately, in practice it is relatively uncommon for HMRC, having investigated the factual position in one year, to be inclined to re-visit the matter in a subsequent year unless the underlying facts have changed. But it is as well to be reminded that, strictly, a decision or agreement on facts has “all too short a date” as the Bard might have put it.
For more information, please get in touch with your usual BKL contact or use our enquiry form.