Returning to the UK due to ill health and its impact on a foreign domicile of choice

This is an interesting area that cropped up in one of our Q&A's. We've therefore decided to make a full article of it and have copied it here as a blog post. The scenario in question involved a UK born and bred individual who left the UK to move overseas (eg Italy). They lived there for a number of years and argued that they had lost their UK domicile of origin and established an Italian domicile of choice. They had their main home in Italy and few UK ties. After 10 years or so they became ill and had to move back to the UK, although they retained their Italian home and always intended to return at some point. The question was - were they a UK domiciliary or not on their return to the UK? When they left the UK they had severed most UK ties, aside from holding a UK property on an annual lease. If you have more than one home in different countries you need to look for the 'sole or chief residence. This was reinforced in this case where the judge said: '…Since a person can only have one domicile, it is necessary to identify which of the countries in which he has a home, if he has more than one, is the country of his domicile. Determining which is the chief or principal residence involves considering the quality of the subject's residence. A person who retains a residence in his domicile of origin can acquire a domicile of choice in a new country only if the residence established in that country is his chief residence.' When looking at which house is the chief residence you need to look at the quality of the residence to decide in which country you intend to reside permanently. Therefore although they had a property available for their use in the UK, it is arguable that their chief residence was in Italy and therefore this should not prevent them arguing for a non UK domicile. In terms of their intention, they needed to show a firm and settled intention to remain in Italy for the rest of their days. This test is not met if they would intend to return to the UK in the future on the happening of a certain and definite contingency. However, it has been reported that acquisition of a domicile of choice is not precluded if a person states they would return to the UK when his health fails. Therefore it could be argued that until their subsequent return to UK residence they would have a good claim for having established an Italian domicile of choice. Ideally, they should have looked to establish their non UK domicile position with HMRC prior to their return (eg by transferring foreign assets to a discretionary trust above the nil rate band). Once they return to the UK and have established UK residence it may be difficult to argue that they originally intended to remain abroad permanently. The fact that they have returned to the UK and have remained there could be classed as casting doubt on their original intention. Having said that it has been reported in one case (Re Furse) that an intention to leave the domicile of choice on the onset of ill-health was not deemed to be sufficient to constitute abandonment of the domicile of choice. Therefore based on this they could be able to argue that an intention to return due to ill health would not have prevented them establishing a domicile of choice in Italy in the intervening period. If they could successfully argue that their original intention was clear and that they did intend to live in Italy permanently, then the position is clearer. Once you have established a foreign domicile of choice this can be lost by abandonment. However, for this to occur, it is necessary for you to cease to reside overseas and also to cease to have the intention of returning to it as your permanent home. The domicile of origin would then revive. In this case the individual had a clear desire to return to live in Italy permanently and their intention to return to reside in Italy wasn't so vague and indefinite as to justify the conclusion that their domicile of choice had been abandoned. Therefore provided you clearly establish your domicile of choice overseas you would need to cease both to reside overseas and intend not to return to live there permanently in order to lose the overseas domicile of choice. This looks to be supported by the Special Commissioners case of Allen and Hately v HMRC. In this case an individual was born in the UK, but later retired to Spain and acquired a domicile of choice there. After their spouses death, and due to the individuals ill health, they moved to live with family in England. The individual in question died in the UK but always wanted to return to Spain and continued to keep their old home there. The Special Commissioners ruled that the individual had acquired a domicile of choice in Spain and they had not reverted to the UK domicile of origin on returning to live in the UK. HMRC failed to show that the individual had abandoned their Spanish home or their ongoing intention to live in Spain when circumstances permitted.