In August this year HMRC published a document (brief 34/10) detailing changes to the circumstances under which they will consider an individual’s domicile – this superceded the previous HMRC brief 17/09 that was issued in March 2009.
HMRC confirmed they will consider opening an enquiry in which domicile could be an issue, or making a determination of IHT in such cases, only where there is a significant risk of loss of UK tax.
They confirm “…these changes are being made because in HMRC experience the existing guidelines were not working well for the customer and HMRC. In future, by adopting a wider risk-based approach HMRC will ensure that resources are deployed in the most cost effective way…”
As usual each case will depend on the individual facts concerned, but will no doubt include a review of the information available about the individual on existing HMRC databases and whether there is a significant amount of tax at risk.
The potential costs involved in pursuing an enquiry will be taken into account as will those of potential litigation should the enquiry not result in agreement between the taxman and the individual.
Any enquiry into an individual’s domicile is likely to be carried out by HMRC’s specialists at Charities & Assets Division in Liverpool (formerly FICO) and will involve a detailed review of the life of the individual, including a review of personal information and an extensive review of available documentary evidence about the taxpayer and potentially, the taxpayer’s close family.