In Evert Henkes v HMRC [2020] TC7645, the First Tier Tribunal (FTT) found it had jurisdiction to determine a person’s domicile status before it decided if closure notices (CNs) must be issued or information notices (INs) were valid; Mr Henkes was UK domiciled, the INs were valid and HMRC had reasonable grounds not to issue CNs.
If you are non-UK domiciled (non-dom) there are tax advantages compared to a UK domiciled individual.
- UK resident non-doms can claim the remittance basis and only be subject to UK tax on foreign income and gains to the extent they are remitted to the UK.
Schedule 36 FA 2008 allows HMRC to make a written request (an information notice) to a taxpayer to provide information or produce a document provided that:
- The information or document is ‘reasonably required’ and, where there is no open enquiry into the tax year in question, HMRC have reason to suspect that there has been an under-assessment to tax, or excessive relief from tax has been given.
A taxpayer under enquiry may apply under s.28A TMA 1970 for a full or partial closure notice and the Tribunal must grant this unless it is satisfied there are reasonable grounds for not issuing a notice.
Mr Henkes, who was born in Venezuela, considered himself non-UK domiciled and claimed the remittance basis for 2014/15 and 2015/16. HMRC had confirmed non-domicile status in 1984.
- He had lived in the UK since 1967 except for two three-year periods when he lived in Singapore and the Netherlands. All his family ties were in the UK but he had overseas non-executive directorships.
- He said his intention was to leave the UK on retirement but he showed no signs of retiring despite being 75. His wife did not share this intention. He had a home in Spain where he spent up to 60 days each year.
- HMRC enquired into his domicile status concluding he had acquired a domicile of choice at some time since 2003. They sought to amend Mr Henkes' Self Assessment for both tax years and issued information notices to check his income and gains for 2013/14.
- Mr Henke applied for final and partial closure notices and appealed the information request for 2013/14.
- The parties disputed whether the FTT was entitled, as a matter of jurisdiction, to determine Mr Henkes' disputed domicile status and, if it was so entitled, whether it should exercise its discretion in such a way as to determine it.
The judge considered the case of Executors of Mrs R W Levy as the facts in the two cases were very similar but came to a different conclusion to the Tribunal then which decided the FTT did not have the power to determine the question of domicile at this stage in the enquiry process. He also considered Embiricos v HMRC [2019] TC07083, which has been appealed to the Upper Tribunal (UT) where the FTT found that, unlike with a final closure notice, HMRC can issue a partial closure notice (PCN) which does not quantify the amount of tax due.
There was some question whether, if the Tribunal did determine the domicile point here, the parties could simply ignore that decision on appeal. The judge concluded that the doctrine of issue estoppel would prevent this.
On the question of jurisdiction, he concluded:
- There is nothing in s.28A or schedule 36 to suggest the FTT does not have jurisdiction to conclude on a mixed question of law and fact. It may decide if there are reasonable grounds for a closure notice not to be issued or if information is ‘reasonably required’.
- It must decide if exercising that power is appropriate. In this case, it was the issue of Mr Henke’s domicile that was the sole issue needing to be determined and to determine the application and the appeal, as once that issue was decided the dispute between the parties would be at an end.
On the question of Mr Henkes' domicile the judge decided:
- On balance, by 6 April 2013 Mr Henkes intended to remain in the UK indefinitely and was UK domiciled based on:
- The length of time he had spent in the UK during his life.
- His strong family connections with the UK.
- Uncertainties around the circumstances in which he would leave the UK, such as when or if he might retire, if he would leave given his wife’s reluctance and where he might go, as the Spanish home was a holiday home.
- The fact that HMRC could not point to a specific date when a UK domicile of choice had been acquired did not prevent a decision that he had acquired such domicile status.
On the closure notice point and appeal against the information notices:
- As Mr Henkes was UK domiciled HMRC had reasonable grounds for not issuing closure notices for 2015 and 2016.
- If the UT in the Embiricos case agreed that a PCN could be made without determining the tax due, HMRC could issue a PCN but Mr Henkes may no longer desire this given the conclusion on his domicile status.
- HMRC was instructed to issue PCN’s for 2015 and 2016, amend the Self Assessments and refuse Mr Henkes' remittance basis claims within 30 days of the UT decision in Embiricos, unless Mr Henkes first withdrew his requests for PCNs to be issued.
- The information requested by HMRC for 2013/14, 2014/15 and 2015/16 was reasonably required.
The judge concluded by pointing out that there was no right of appeal against his decision that the information notices were reasonably required. Mr Henkes can appeal in respect of the closure notices but this would have to be considered in the light of there being valid outstanding information notices.
Links to subscriber guides
Non-domicile status, deemed domicile & tax
Who is non-UK domiciled? What does this mean for UK Income Tax, Capital Gains Tax and Inheritance Tax? What reliefs are available to non-doms?
Remittance basis (overseas income)
What is the remittance basis? Who can claim it and when? What are the advantages of claiming the remittance basis and how much is the remittance basis charge?
Closure Notices
When does HMRC issue a closure notice? Can a taxpayer demand one? Are there appeal rights?
Schedule 36 Notices
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?
How to appeal an HMRC decision
What type of decision can you appeal? What are your different options when you disagree with HMRC? What are the key steps in making an appeal?
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