Tuesday, December 05, 2006



Whilst the public reaction to the Special Commissioners decision in Gaines-Cooper v HMRC has concentrated on the residence aspect of the decision, (which is considered in Blog 30) the case also has interesting lessons on the domicile front.

Mr Gaines-Cooper was born in England in 1937. His first business venture begun in the UK in 1958. He sold the business in 1971. In 1973 he visited the Seychelles, largely by accident (his flight from Sri Lanka to Zaire was delayed there for several days), and, he said, “immediately fell in love with the Seychelles and wanted to make his permanent home there”. From that time he visited the Seychelles frequently and in 1973 sought a residence permit there. This was granted on condition that he invest in the local economy, so he set up a factory in Seychelles. He owns and operates that factory to this day. At the end of 1975 he bought a house in the Seychelles. He occupied it for about a year and then let it out for three years as a business venture in Canada was in financial difficulty and he needed to be in Canada to sort it out. He also let his UK house for roughly the same period. He was granted a Seychelles residence permit in 1976 and moved his personal effects from the UK to Seychelles. A Seychelles residence permit is for five years, but it has always been renewed and Mr Gaines-Cooper has had such a permit continuously since that time. He has not however taken Seychelles citizenship but continues to be a UK citizen. As an international businessman I suspect that he feels a UK passport makes travel easier. In 1976 (when the UK had exchange contracts) he informed both the Bank of England and the Inland Revenue that he had taken up residence in the Seychelles. His will declared him to be domiciled in the Seychelles, but it was drawn up by English solicitors. It appointed an Isle of Man trust company as executors. In 1999 he made a new will which again stated he was Seychelles domiciled but was again drawn up by English solicitors in accordance with English law and appointed English based executors.

In 1993 he married a Seychellois woman, Jane, who he had met in 1975, in the Seychelles. She had come to the UK in 1977 to complete her education. In 1979 her family had moved to the UK because of adverse political pressures in the Seychelles (her father was a civil servant there). Their first child was born in 1998 and Jane seems to have spent most of her time in the UK bringing up their children since then, although she visited the Seychelles several time a year.

Mr Gaines-Cooper gave evidence that he firmly believed and intended that he would live out his days in the Seychelles, he had never had the desire to return to live in England, although he had to travel extensively on business the Seychelles was his true home, and it is where he intended to spend the remainder of his days. Jane gave evidence that she regarded their house in the Seychelles as her home and their UK house as her base when she was in the UK. Five independent witnesses, including a Bishop, gave evidence that they were in no doubt that Mr Gaines-Cooper had made his home in the Seychelles and that he was regarded by all there as Seychellois.

How then could the Commissioners have held him to be UK domiciled, bearing in mind that domicile is normally dependent primarily on intention?

1. They largely dismissed the evidence of the witnesses on the grounds that they knew him only in the Seychelles and knew little of his life elsewhere.

2. They seem to have been heavily influenced by the fact that he always retained a house in the UK in which his family lived.

3. They regarded it as significant that nearly all his connections with the UK were located in a comparatively small area of Berkshire and Oxfordshire.

4. They regard the fact that his will was under English law and prepared by English solicitors as “of some significance”.

5. They noted that Mr Gaines-Cooper had always retained British citizenship and did not apply for citizenship in the Seychelles.

6. They also noted that Jane had taken British citizenship.

7. They did not think that Mr Gaines-Cooper spent materially more time in the Seychelles than in England.

8. He had not established his family principally in the Seychelles.

9. It was significant that Jane had chosen to live in England – and it was clear that “the Appellant is much attached to his wife and we believe he had the intention to spend time with her”.

Their conclusion was that “the Appellant never did wholly reject England nor, indeed, that small part of it located in Berkshire and Oxfordshire where he had so many ties and connections; on the contrary he felt its pull upon his affections and interests all his days”. It is not clear how they could discern such an attachment in the face of Mr Gaines-Cooper’s evidence to the contrary. The answer is that they looked at the “totality of the facts” rather than at his professed intention. This is worrying in so far as history cannot be a guide to future intention. As far as I can recollect this is only the second domicile case that HMRC have taken whilst the taxpayer is still alive. In the past they believed that they were bound to lose in such circumstances as they could not disprove the evidence of the taxpayer as to his intention. If the approach of the Commissioner now is, as in this case, to discount the evidence of the taxpayer, we can probably expect to see a lot more domicile cases in the future.

It must however be remembered that in both this case and the earlier one the taxpayer had started life with a UK domicile. It is for the person who contends that there has been a change of domicile to prove it. Most people claiming non-UK domicile status start life with a non-UK domicile of origin. It is accordingly for HMRC to prove that, on the balance of probabilities, the person has acquired a UK domicile. It may well be that whilst the totality of the facts might cast doubt on the taxpayer’s professed intention in the context of the acquisition of a domicile of choice, they would not suffice to demonstrate the acquisition of such a domicile in the face of a taxpayer’s professed intention to retain his domicile of origin.

Although the Gaines-Cooper case seems to have been argued on an all or nothing basis, the Commissioners did express a view that Mr Gaines-Cooper may well have acquired a Seychelles domicile of choice in around 1976, but that, if he did so, he lost it before 1992 (the start of the period to which the tax assessments related), as from 1992 his physical presence in England was that of an inhabitant, so from that period “he did not discharge the burden of proving that he retained an intention permanently or indefinitely to reside in the Seychelles rather than England”. This not only emphasises the fragility of a domicile of choice but indicates that it is probably far more fragile than most of us believed. It shows that establishing a non-UK domicile is only the first step. Retaining it may be far more of a challenge.

Robert W Maas


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