In November 1961, Ian Henderson held a party in London before his departure to Brazil to work for the South American arm of his family’s international business. He can scarcely have imagined that more than 55 years later that party, and the reason for it being held, would feature in a court case about his grandchildren’s tax status.
Highlighting the 'non-dom' status
To explain why we need to delve into the strange work of domicile and the place that it has in the tax system. Non-doms have attracted much public attention in recent years – most of it adverse – because of a perception that they are somehow ‘getting away’ without paying their fair share of tax. It seems to be taken for granted by those who express such views that it is easy to point to somebody and say that he/she is a non-dom – almost as if they wore a special uniform. In fact, as the Henderson family found, identifying who is and is not domiciled in the UK can be remarkably complex. Why is this?
A child of married parents will take their domicile status from his or her father (mothers only come into the equation for unmarried parents – something which seems impossibly anachronistic in this day and age). When he/she reaches adulthood it is possible for him/her to acquire a new domicile by his/her own actions, such as settling permanently in a new country, but unless that is done the domicile of their father sticks with them for their whole life.
But how do you know what the father’s domicile is? Unless he has acquired a new domicile of choice he will be domiciled where his father was domiciled – and so on right back in theory to Adam and Eve (which one will depend on your view as to whether they got married or not).
The dispute I mentioned above was about the domicile status of Ian Henderson’s grandchildren. They had not established any independent domicile of choice and so took their father’s domicile. But what was that? Their father, Nicholas was born in Brazil while his father Ian was working out there and his mother, Ian’s wife, was Brazilian. So the question boiled down to whether or not Ian had sufficiently severed his ties with the UK, where he was born and where his family had lived for generations in order to have established a domicile in Brazil. If he was domiciled in Brazil then Nicholas had a Brazilian domicile of origin. If (and that was one of the questions in the case) Nicholas had not acquired a new domicile of choice by his own actions he too would have been domiciled in Brazil at the time his children were born, in which case they would also have been domiciled in Brazil. I hope that you are following all of this.
So to establish the grandchildren’s domicile the court had to look over Ian’s entire life from his birth in 1930. Had he established an intention to live in Brazil indefinitely or permanently? The tribunal looked at the evidence in minute detail, down to questions of what he did with his car when he moved to Brazil, what language he spoke at home, what schools he looked at for his children and why he came back to England after about five years, never to return to Brazil to live.
In the end, the tribunal was very clear that he had never established that he intended to live permanently in Brazil and therefore he remained domiciled in England. If he was domiciled in England when his son was born, then Nicholas was also domiciled in England. Nicholas had lived all of his adult life in the UK, other than when posted abroad as an officer in the UK (not the Brazilian) army, and clearly had not established a domicile of choice anywhere else. So if he was domiciled in England when his children were born then those children must also have been domiciled in England.
And that party in November 1961? Ian Henderson described it as a ‘farewell party’, suggesting that it was somehow to mark the severing of links with the UK before he took up his new life in Brazil with his wife. The tribunal didn’t accept this. There was no doubt that there was a party – but the judge commented ‘we are not satisfied that this event was arranged because of a perception that they would never return to the UK’.
There’s a lesson here for the Facebook generation. If you post a Facebook entry after a big party to mark your starting a new job abroad, imagine that in 50 years’ time it will be used in evidence in your grandchildren’s tax appeal. Will it show tearful farewells as you take your final leave, or will the effect be spoilt by your friends in the background saying that they will soon be welcoming you back.