News & Views

Lessons in Property Disputes: A Legal Examination of the £32.5M Mansion Case

Tom Jones,
24th February 2025

Case Study

Iya Patarkatsishvili and Yevhen Hunyak v William Woodward-Fisher

Introduction

Judgement has been handed down in the case of Iya Patarkatsishvili and Yevhen Hunyak (the Claimants) v William Woodward-Fisher (the Defendant) by a judge in the High Court on the 10 February 2025. The case concerned whether there was a misrepresentation in the Defendant’s replies to pre-contract enquiries in the sale of a property for £32,500,000.

Background

The property was substantially renovated by the Defendant during his ownership where he resided prior to the decision to sell the property.
In early 2018, the Defendant’s partner noticed a problem with moths within the house that had damaged expensive clothing.
The Defendant obtained quotes from two companies, one of which they employed for a treatment plan that commenced 5 March 2018. None of the initial treatments were successful.
The company returned and produced a report dated 15 May 2018 that stated the cause of the moths is likely to be an infestation within the natural wall insulation used at the property and that it would not be resolved until this was removed.
Sale of the property was agreed in February 2019 for £32,500,000 to the Claimants. The conveyancing process proceeded as normal with exchange of contracts taking place 7 March 2019 and completion on the 2 May 2019.
The Claimant made numerous visits to the property prior to their offer to purchase and throughout the conveyancing process. They saw no moths during their visit.
Within days of moving in, the claimants noticed numerous moths in the property and commissioned treatment at the property which resulted in a report that recorded a carpet moth infestation. Over the next few months, the Claimants employed several companies to deal with the moths at the property.
In September 2020, the claimants approached a company that advised them that they had carried out treatment at the property prior to their ownership.
The company provided the Claimant copies of the reports that they had shared with the Defendant, dated May and June 2018 in which they had identified the problem with the moth infestation as being the wool insulation in the property.
A claim was issued December 2021.

Summary

The Claimants alleged that the Defendant falsely answered their pre-contract enquiries and concealed a moth infestation of the insulation in the house. This induced the Claimants to buy the property for £32,500,000.

The Claimants sought an order for repayment of the purchase price with interest, damages for losses to which they had incurred in buying the house and trying to remedy the infestation.

There were three replies to the pre-contract enquiries that were found to be false. These were:

The Defendant did not know of any vermin infestation in the house;
Had not received any report on vermin infestation or on the fabric on the property, other than what had already been disclosed by the Defendant; and
That the Defendant did not know of any hidden defect in the property.

The Defendant disputed that any misrepresentations were made and that the Claimants had not relied upon the replies to the pre-contract enquiries. The Defendant argued that the Claimants were barred from recission of the contract due to the fact that they had excessively delayed bringing their claim.

While the Claimants did not have direct knowledge of those replies, their solicitors did. The replies were provided along with a report on title and the Claimants were advised that there were no red flags and it was fine to proceed with the purchase. Therefore, the Claimants did rely upon the replies in buying the house.

The defendant had put forward three defences: delay, affirmation, and impossibility of restitution. The defences were based on the following:

The Defendant contended that Claimants had known of the claim for misrepresentation from June 2020 or earlier and had not elected to rescind until May 2021, therefore causing delay;
By continuing to live in the property and carry out substantial works, improvements and renovations the Claimants had affirmed their purchase;
Restitution was argued to have been impossible based on the fact the Defendant was unable to repay the purchase price as the Claimants had altered the property in such a way that it was not possible for them to give back the thing that he had sold them.

Delay:

The claim was delayed from October 2020 until May 2021, before the Claimants had made the election to rescind. The court considered that this was not sufficient based on the following:

The Claimants had not excessively delayed in bringing their claim;
The length of the delay had no particular consequence adversely or in favour of either party;
It was understandable the Claimants wanted to consider their rights and options before pursuing a claim for misrepresentation;
The Claimants sought advice from numerous experts before making their decisions. Such advice takes time.

Affirmation:

The defence of affirmation, amounts to, the Claimants having been taken to have made an irrevocable choice to treat the contract of sale as remaining in place through their actions or lack there off. The Defendant had argued that by the Claimants continuing to live in the property and carry out works, they had affirmed the transfer of legal title and contract.

Restitution:

The Defendant claimed he was not able to repay the purchase price so the title could not be re-transferred.

However, this was not what the Claimants were seeking; they were not proposing to sell the property back but to return the title with the protection of a lien or equitable charge in favour of the Claimants. This results in the effect of a legal mortgage, that will be redeemed when the Defendant sells the property. Rescission was not barred.

Held

The Claimants were awarded damages, including the stamp duty land tax and other costs paid on the purchase of the house and all costs incurred in seeking to eliminate the infestation.

The Claimants right to repayment will be protected by an equitable lien on the house in the meantime.

The Defendant was held to have known there was or may have been a serious infestation of moths requiring removal of the natural insulation in the house. The Defendant had received and read at least two reports from pest control companies dated 16 May 2018 and 25 June 2018, which informed his wife of the infestation and the need to remove the infested insulation.

The exact costs will be determined at a later hearing.

Practical Considerations / Conclusion

While this was a residential matter, it clearly outlines the importance of disclosure during the purchase and sale of a property, whether it is residential or commercial. A seller should ensure that the information provided in the pre-contract enquiries is clear, accurate, and reflects the position of the property and any potential issues during their ownership.

If unsure of whether something is relevant or must be provided to the buyer, you should raise it directly with your solicitor, however in any event the best course of action is to provide the buyer with all the information so that they can make an informed decision.

The court’s decision to rescind the contract shows the serious repercussions of misrepresentation being found in the conveyancing process.

If you have any questions and/or would like advice in relation to commercial property, please contact Tom Jones or your usual Dixcart contact on: hello@dixcartuk.com.

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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.

News & Views

Ceasing to be UK Tax Resident – Don’t Get it Wrong!

Peter Robertson,
23rd May 2024

Case Study

It is January 2025 and two people are sitting at the departure gate at Heathrow waiting for their (inevitably) delayed flight to the Bahamas. They start a conversation and talk about why they are flying to this Caribbean island.

Person A, Mrs Sunseeker, explains to Person B, that she had lived in the UK for a long time as a resident “non-dom,” but that expected changes to the tax rules for longer term residents had meant that she had decided to leave the UK and cease being tax resident; “My friend told me I just had to spend fewer than 90 days each year in the UK.” she declares.

Fortunately for Mrs Sunseeker, Person B, Mrs Tax, is, by nominative determinism, a tax adviser and explains that the old ‘90 day’ rule does not apply anymore and suggests that she takes a look at the UK statutory residence test – link to STR.

Background for Mrs Sunseeker

Mrs Sunseeker moved to the UK in the early 2010s, as a student. After graduating, she was offered a job in the financial services industry. She has been very successful and accumulated significant personal wealth.

In 2015, she inherited the shares of a large family business, back home in Dubai, which started to generate a regular dividend income of around £5 million a year which she has kept in her bank account in Dubai. As a UK remittance basis of taxation user, the Dubai dividends have not been taxed in the UK, as Mrs Sunseeker never remitted them into the UK.

However, with the UK non-dom rules changing, remaining in the UK was going to be just too expensive for income and inheritance tax purposes. She has therefore decided to move to a warm country. Mrs Sunseeker is planning to carry on working for the same employer (taking advantage the fact that her firm realises she can work remotely) and, indeed, is likely to be working very hard on the days that she returns to the UK.

She is married. Her husband is British and does not want to spend as much time outside of the UK as his wife. His only source of income is in the UK and he still enjoys his work. As he is going to stay, they will keep their home and Mrs Sunseeker will live there when she returns to visit him.

What is Mrs Sunseeker’s Tax Status and Why?

While waiting for the flight, Mrs Sunseeker takes a look at the residence test rules. She realises that the first two parts of the test, the ‘Automatic Tests’ do not apply to her and reads on to the ‘Sufficient Ties’ section. Mrs Sunseeker has four such ties, or connections:

Spent more than 90 days in the UK in both of the previous two tax years;
Will have available accommodation in the UK;
Has a UK tax resident spouse and will continue to do so;
Will work in the UK for more than 40 days under the definition of the test.

What Will the Tax Impact Be?

As she has four ties, Mrs Sunseeker will be tax resident in the UK, for at least the first two years after she leaves, by spending just 16 days per year in the UK, far lower than the 90 she had anticipated.

The next time she receives her large dividend, she would still be considered UK tax resident and will suffer UK income tax. It may be even worse, if she has not paid this tax on time she would receive a late payment penalty, which is quite likely because she no longer believed she was UK tax resident and she could be liable for penalties under the ‘offshore assets’ rules too.

The problem would become further compounded were Mrs Sunseeker to sell her shares in the family business in Dubai for a large gain, while she believed she was not UK resident.

Other Considerations

Please note for completeness, that the UK ‘split year rules’ are not being considered, nor are the tax implications of Mrs Sunseeker continuing to receive a salary for work she undertakes when in the UK. Dixcart, would of course advise on these, where relevant. The Bahamas does not have a double tax treaty with the UK, and there is therefore no tie breaker clause to consider in this scenario either.

So, What Could Mrs Sunseeker Do?

Can you believe it, the flight is still delayed!

Mrs Sunseeker picks up her phone and calls Mr Sunseeker. Whilst he loves his job, he now understands that there will be a high tax cost if his wife does not properly exit UK tax residence. He packs his things and heads to the airport. While on his way, he calls his employer and resigns, and then calls an estate agent to list the home for immediate rental.

The repercussions of the two actions above, would be to reduce the number of UK ties that Mrs Sunseeker has, from four to two:

90 days in both of the previous two tax years; and
Work tie (assuming she still works, when back in the UK).

Now she would be able to spend up to 90 days in the UK per year and lose her UK tax residence status.

Very lucky!

Whilst everyone else on the flight was cursing the delay, Mrs Sunseeker had struck lucky. However, had Mr and Mrs Sunseeker started to plan earlier than at the airport departure lounge, there would have been more options to consider around their employment situation and their home status, and they might have avoided having to take such extreme steps.

How Can Dixcart Help?

Dixcart’s team of lawyers, accountants, immigration and tax professionals would have assisted Mr and Mrs Sunseeker with:

Pre-departure tax planning;
Ongoing tax planning, to ensure that UK tax residence is not accidentally acquired again in the future;
Employment law advice for both individuals in relation to their ongoing employment contracts, should they wish to continue to work, as well as related UK tax advice regarding the income being earned;
Application for Indefinite Leave to Remain before they leave the UK, so they can be sure that they can return in the future.

Additional Information

If you have any questions and/or would like advice on regarding tax residence in the UK, please speak to Peter Robertson or Paul Webb at: hello@dixcartuk.com or to your usual Dixcart UK contact.

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How a Family Investment Company can be of Benefit: A Case Study

Paul Webb,
18th December 2023

Case Study

Background

Mr. Smith has been a client of Dixcart’s for many years and he wants to explore the options available to provide financial help to his children, as they get older and start their careers. The children are all in their teens, with the eldest just about to start university. Mr. Smith wants to ensure that they make considered future decisions financially and do not take the opportunity to have a series of ‘gap years’.

Mr. Smith runs his successful logistics company with his wife, who takes more of a background role. They have built up an investment portfolio and own four residential properties, acquisition of the final two was partly funded by borrowing. All of their assets are jointly owned.

Mr. Smith is already thinking about planning for the future and ways in which he might be able to mitigate future inheritance tax (IHT) obligations.

Family Investment Company – What Is It?

Family Investment Companies (FICs) are companies limited by shares (an “Ltd” or “Limited”) and often established by parents and/or grandparents (“Founders”) to benefit themselves and their family, as shareholders. The popularity of FICs has increased over recent years, and they are viewed as a corporate alternative to a discretionary trust.

Summary of Current Status

A summary of the current situation and the assets owned by Mr. and Mrs. Smith are as follows:

Mr. Smith’s annual income is approximately £150,000. His wife is a higher rate taxpayer;
Company shares are held equally by Mr. and Mrs. Smith and will qualify for 100% business property relief;
In the event of a sale both Mr. and Mrs. Smith would qualify for business asset disposal relief;
The investment and rental properties portfolio are currently worth £3.5 million, their main residence is worth £1 million, and they have recently inherited £1.5 million.

What Are the Potential Advantages of a Family Investment Company?

At a high level the potential advantages of using a FIC can be summarized as follow:

Income retained within the FIC (primarily rental and dividend income) would attract lower rates of tax (up to a maximum of 25%), in comparison to Mr. Smith’s marginal rate of 45% (39.35% for dividends) and Mrs. Smith’s marginal rate of 40% (33.75% for dividends);
If the two rental properties that are subject to a mortgage can be transferred to the FIC, a significant advantage would be that full interest relief would be available although this would likely give rise to SDLT charges which would have to be considered;
Mr. and Mrs. Smith could make potentially exempt transfers of value that would become fully exempt if they survived for at least seven years, so that their estates on death would benefit from the full IHT nil rate bands;
Future increases in the value of the investments owned by the FIC would increase the value of the company’s shares. The children’s shares would therefore increase in value outside their parent’s estate. The application of minority discounts might also mean that the total monies subject to IHT were reduced;
Dividend payments could be directed to the children whilst they were still at university and likely to be non-taxpayers, or when they were basic rate taxpayers.

Mr. and Mrs. Smith would retain full control of the company’s assets and could decide on dividend payments.

Are There Any Potential Negatives in Using a Family Investment Company?

It must be remembered that there will be double taxation of income/gains paid out to shareholders, particularly where the shareholders pay tax at the higher rates.

In addition, care needs to be taken with dividends paid to children whilst they are minors such that they are not assessed to tax on Mr. and Mrs. Smith.

FICs do not qualify for many CGT and IHT reliefs.

Finally, that there will be administrative obligations and costs associated in running the company.

Agreed Action

Mr. and Mrs. Smith decide that they want their children to benefit from their recent inheritance of £1.5 million and the increases in value of certain of their investments. They therefore decide that they will use the inheritance to subscribe to shares in the company, most of which will then be given to the children, and that they will also transfer some of their assets to the company, leaving the consideration for those transfers outstanding on a loan account owed to them.

The assets to be transferred will be chosen to minimise tax liabilities and maximise future tax savings. The share portfolio has been managed carefully and investments have been bought and sold relatively frequently, partly to use the CGT annual exemption. It will therefore be possible to identify shares that can be transferred without giving rise to a capital gain. There will, however, be stamp duty payable at 0.5%.

Mr. and Mrs. Smith also decide to transfer the investment properties that are subject to a mortgage, so that full interest relief can be obtained. As they were recently acquired there will be no capital gain, but there will be stamp duty land tax to pay.

Structure of the Company

Mr. and Mrs. Smith will be appointed as directors, and will each be issued one ‘A’ ordinary share. This will mirror their current 50:50 ownership of assets.

Three further classes of ordinary shares (B, C and D) will be created for the three children, which will have no voting rights but entitlement to dividends, as declared on that particular class of shares, and ranking equally with the ‘A’ ordinary shares, as to entitlement to capital.

This will enable dividends to be paid to the children as required, once they reach 18, but will also mean that the capital value of their shares will increase, as the value of the company increases.

Mr. and Mrs. Smith, will initially subscribe to all of the shares but will then give the B, C and D shares to their children. The initial value of the company will be equal to the amount of cash subscribed, the other properties having been transferred to the company at full market value.

If the shares are transferred immediately there will be no CGT consequences, and no stamp duty as it is a gift.

In order to ensure that most of the initial value passes to the children, 100 shares of each class (B, C and D) will be created in order to swamp the A shares. This will ensure that value is transferred by way of a potentially exempt transfer. We would always recommend that that professional valuation advice be taken before proceeding.

Additional Information

This case study examines one particular set of circumstances. The concepts would be the same in other situations but detailed professional advice should always be sought.

For additional information, please contact Paul Webb at Dixcart UK: hello@dixcartuk.com.

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News & Views

Favourable tax treatment for employers who change company vehicles to electric

Carrie Crosland,
6th June 2022

Case Study

Business owners and employers who provide their employees with company vehicles before March 2025 can enjoy substantial tax benefits in the next few years for making the switch to pure electric in advance of the 2030 ban. Example Case study:

A potential prospect heard about the tax relief available to business owners and employees with company vehicles, who switch to pure electric before the 2030 ban. He uses a company car and therefore can also benefit from his company making the change.

Dixcart UK can advise clients who are considering a move to electric company cars that they can:

Benefit from a 100% corporation tax relief on the purchase price in the year of purchase of the vehicle, provided that the car is new and unused.
Lease the vehicle if they wish and that the lease payment for an electric car is fully deductible against tax for the employer, although VAT recovery is limited to only 50% of the VAT cost – where the vehicle is used privately by the employee.
Provide clients with the use of the company car with a drastically reduced benefit in kind which would not only save tax but also would save the company employer’s NIC.
Benefit from a much lower value for the taxable benefit in kind and enjoy savings of income tax for the employee and Class 1A NIC for the employer, as the percentage for an electric car on how polluting they are is a modest 2% (compared to 37% for diesel and petrol cars).
Allow employees to continue to give up salary for their vehicle via salary sacrifice with an electric car, without being caught by the Optional Remuneration Arrangements (OpRA) rules. Where the employee gives up some salary for an electric car, the employee can still only pay tax on the cash equivalent of the benefit in kind if this is less than the salary given up.

In addition, there are incentives for employers who provide charging points on the work premises so employees can enjoy the convenience of charging while they are at work. Employers who install electric charging points and electric charging equipment can claim 100% of the cost as a first-year allowance and receive immediate upfront tax relief. They can also recover the VAT.

At the moment, the favourable tax treatment is set to run until March 2025, but there is no guarantee how long the benefits will be retained.

Going back to our example case study, the company (having understood all of the advantageous incentives for both employers and employees), have decided to go ahead and make this change now.

They have decided that the company will buy new, electric cars for the directors and key staff members and they have also decided to upgrade their carpark in order to provide workplace charging points. They would like to incentivise their staff members and show that they care about the wellbeing and values of their employees.

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How Dixcart UK can assist clients with a portfolio of services: Employment, Legal, Immigration, Tax and Accounts

Carrie Crosland,
6th June 2022

Case Study

EU company looking to expand into the UK and relocate several non-EU employees. Example Case study:

A German company is looking to expand into the UK but does not already have a UK company incorporated. They also want to relocate several non-EU employees, currently based in Germany, to the UK.

Dixcart can initially start by assisting the client with the employment aspect in the UK, but the rest of our legal team, Immigration, and tax and accounts teams can also help by providing the below services:

Employment:

Advising on the English employment rights for the employees and what that means
Drafting UK employment contracts for the employees
Drafting an employee handbook
Liaising with the client’s German lawyers, regarding the implications in Germany, ahead of and after, the move

Immigration

Advising the employees relocating on the UK immigration rules and requirements and assisting with the appropriate visas

Tax

Advising on the requirement for UK payroll and setting this up for the company and running the payroll going forward
Advising on the tax payable by the company in the UK
The personal tax implications for the employees, once they have relocated to the UK, and personally helping them with their tax planning

Legal

The rest of our legal team, our commercial company and commercial property advisers, can help with the:

Incorporation of the UK company
Produce articles of association, including different share classes and rights
Advise on a commercial lease and follow out all of the necessary procedures and protocols in acquiring a commercial property

Accounts

Once a UK company has been incorporated, Dixcart UK can:

Prepare the monthly management accounts for the UK entity
Register the company for VAT and prepare the quarterly VAT returns
Manage the annual accounts
Manage the annual corporation tax compliance

We can Help

Should you need any further advice and assistance, please email: hello@dixcartuk.com.

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Tax planning ahead of move to UK – avoiding substantial tax liability further down the line

Carrie Crosland,
6th June 2022

Case Study

Mr and Mrs Jones relocated to the UK in 2021 and wish to benefit from the Remittance Basis of Taxation. Example Case study:

At the beginning of January 2021, Mr and Mrs Jones decided they wanted to relocate from Australia to the UK, so that their two minor children could start school early in September 2021.

They had already consulted with an Australian tax adviser to make sure that they carried out all of the relevant local tax planning in preparation for leaving Australia, but they were contacting us to find out what the tax implications would be for them once they had relocated to the UK.

The previous year, their friends had relocated to the UK, and believing that as they were not originally from the UK, they would be taxed on the ‘remittance basis’ and hence not on their non-UK source income, had found themselves liable to a substantial amount of capital gains tax and income tax as they had not planned for the move.

Fortunately for Mr and Mrs Jones, they had heard of this and not wanting to find themselves in the same situation, sought UK tax advice.

They had a large sum of cash savings held in an Australian bank and were planning on renting out their property in Australia, from August 2021.

Dixcart UK are able to advise them that:

They would become tax resident in the UK from 1 August 2021 under the UK’s split year rules (as they planned on moving to the UK on 1 August 2021) and would be liable to file a tax return by 31 January 2023 and pay any taxes due,
They should instruct their Australian bank to make sure interest from their cash savings is kept in a new, but separate account going forward, and
They should instruct their Australian bank, as of August 2021 when they start to rent out their property, to make sure rental income is deposited in a separate newly created bank account (but within the same bank).
If they ever decide to sell their Australian property, they should not remit this income to the UK (unless they need the funds in the UK but see below) but add the proceeds of the sale to a newly created capital gains account with their bank.

In regard to the final bullet point, we often see individuals sell their properties abroad in order to purchase a property in the UK, which is exactly what the friends of our clients did.

Instead, if Mr and Mrs Jones ever decide to purchase property in the UK, they should try to remit monies from their original cash savings, rather than use the money from the sale of their property, as they would be remitting capital that they have PRIOR to becoming UK tax resident, and that this would be tax free in the UK providing the followed the advice above.

As planned, in August 2021, Mr and Mrs Jones moved to the UK ready for the new school term. If they had not sought UK tax advice in advance of this, and put appropriate tax planning measures in place, they may have had a very different start to living in the UK than they did.

Read our article here to find out what happened to their friends and how the outcome for them could have been so different and could have resulted in a UK tax liability of ZERO instead of what did happen.

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Pre-arrival UK Tax Planning for non-UK Domiciled Individuals

Ravi Lal,
24th May 2022

Case Study

Due to the impact it can have on an individual’s UK tax liability, it is vital that domicile is fully understood by those wishing to relocate to the UK permanently.

In general terms, if a non-domiciled individual wishes to move to the UK permanently and has no intention to return to their previous country, then there is a strong case they will be considered UK domiciled for tax purposes.

Effective tax planning, pre-UK arrival is therefore critical to avoid potential costly surprises in the future.

UK Domiciled vs Non-domiciled Impact

Firstly, let’s briefly look at the UK tax implications for a person that is UK domiciled vs non-domiciled. Please note both individuals are UK tax resident in the year for this illustration.

Mr UK Domiciled

Liable to tax on worldwide income and gains
Worldwide assets are subject to UK inheritance tax

Miss Non-domiciled

Worldwide income and gains are taxable on the arising basis
A claim for the remittance basis can be made which will mean Miss Non-domiciled will only be taxed on her foreign income and gains if she remits it to the UK. If it is kept offshore, she will not be subject to UK tax
Non-UK situs assets are excluded from UK inheritance tax

From this, we can see that Mrs Non-domiciled position is usually more advantageous from a UK tax perspective.

Determining your domicile

In establishing whether a new domicile of choice has been created, careful consideration must be taken for the following points before making a decision to move to the UK:

the intentions of the individual;
their permanent residence;
their business interests;
their social and family interests;
ownership of property; and
the form of any Will that they have made.

This list is by no means exhaustive and there is no single criteria which determines whether an individual is or is not domiciled in the UK. Instead, a ‘balance of probabilities’ approach is taken.

Defend your domicile

Taking into account the above, it is therefore essential to have provisions in place before arriving in the UK, to defend any potential challenge from HMRC.

Domicile enquires can be lengthy and intrusive should HMRC doubt an individual’s non-domicile claim. This can involve months or even years of correspondence involving various questions into background, lifestyle and family and social connections, both from a historic perspective and to establish future intentions.

Acquiring and maintaining evidence of strong, ongoing links to the country of domicile is crucial for those claiming non-domiciled status, and so is evidence of an intention to leave the UK at a future date. This can be particularly problematic on death, potentially bringing a foreign estate within the scope of UK inheritance tax.

To avoid any hiccups in the future, it may be worth considering having a domicile statement prepared, to provide contemporaneous evidence supporting the claim .

Case law

IRC v Bullock: Mr Bullock had a domicile of origin in Nova Scotia. He lived in England for 40 years. His wife did not want to live in Nova Scotia. Mr Bullock hoped to return there should he persuade his wife to change her mind or should he survive her. It was held by the Courts that he had a real determination to return rather than a vague aspiration. Accordingly he retained his Nova Scotian domicile of origin and had not acquired an English domicile of choice.

In contrast:

Furse v IRC: Mr Furse expressed a wish to live in England for the rest of his life save only for a contingency that he would return to the USA, should he cease to be physically able to take an active interest in his farm (situated in England). The Courts decided that this intention was so vague as to impose no limit on his intention to remain in England. Accordingly he had acquired an English domicile of choice.

Summary and Additional Information

From the above we can see it is difficult to make a judgement without fully examining an individual’s position in detail.

An individual’s domicile status is a fundamental factor in determining his/her liability to UK tax. It also has implications for other branches of the law.

Due to HMRC’s increased investigations into the tax affairs of non-domiciled, individuals should be prepared to present a robust defence in the event of any challenge from HMRC. A domicile statement can greatly assist, to provide evidence of an individual’s intentions, where it is supported by the facts, and can be particularly useful in situations where enquiries are opened by HMRC after death.

If you require additional information on this topic and further guidance regarding your domicile status, please contact your usual Dixcart adviser or speak to Paul Webb or Ravi Lal in the UK office: hello@dixcartuk.com.

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Ceasing to be UK Tax Resident – Don’t Get it Wrong!

Peter Robertson,
12th April 2022

Case Study

It is March 2022 and two people are sitting at the departure gate at Heathrow waiting for their (inevitably) delayed flight to the Bahamas. They start a conversation and talk about why they are flying to this Caribbean island.

Person A, Mrs Sunseeker, explains to Person B, that she had lived in the UK for a long time as a resident “non-dom,” but that changes to the tax rules for longer term residents had meant that she had decided to leave the UK and cease being tax resident; “My friend told me I just had to spend fewer than 90 days each year in the UK.” she declares.

Background for Mrs Sunseeker

Mrs Sunseeker moved to the UK in the early 2000s, as a student. After graduating, she was offered a job in the financial services industry. She has been very successful and accumulated significant personal wealth.

In 2010, she inherited the shares of a large family business, back home in Dubai, which started to generate a regular dividend income of around £5 million a year which she has kept in her bank account in Dubai. As a UK remittance basis of taxation user, the Dubai dividends have not been taxed in the UK, as Mrs Sunseeker never remitted them into the UK.

However, with the UK non-dom rules changing in 2017, remaining in the UK was going to be just too expensive. She has therefore decided to move to a warm country. Mrs Sunseeker is planning to carry on working for the same employer (taking advantage the fact that her firm realises she can work remotely) and, indeed, is likely to be working very hard on the days that she returns to the UK.

What is Mrs Sunseeker’s Tax Status and Why?

Spent more than 90 days in the UK in both of the previous two tax years;
Will have available accommodation in the UK;
Has a UK tax resident spouse and will continue to do so;
Will work in the UK for more than 40 days under the definition of the test.

What Will the Tax Impact Be?

As she has four ties, Mrs Sunseeker will be tax resident in the UK, for at least the first two years after she leaves, by spending just 16 days per annum in the UK, far lower than the 90 she had anticipated.

The problem would become further compounded were Mrs Sunseeker to sell her shares in the family business in Dubai for a large gain, while she believed she was not UK resident.

Other Considerations

So, What Could Mrs Sunseeker Do?

Can you believe it, the flight is still delayed!

The repercussions of the two actions above, would be to reduce the number of UK ties that Mrs Sunseeker has, from four to two:

90 days in both of the previous two tax years; and
Work tie (assuming she still works, when back in the UK).

Now she would be able to spend up to 90 days in the UK per annum and lose her UK tax residence status.

Very lucky!

How Can Dixcart Help?

Dixcart’s team of lawyers, accountants, immigration and tax professionals would have assisted Mr and Mrs Sunseeker with:

Pre-departure tax planning;
Ongoing tax planning, to ensure that UK tax residence is not accidentally acquired again in the future;
Employment law advice for both individuals in relation to their ongoing employment contracts, should they wish to continue to work, as well as related UK tax advice regarding the income being earned;
Application for Indefinite Leave to Remain before they leave the UK, so they can be sure that they can return in the future.

Additional Information

If you have any questions and/or would like advice on regarding tax residence in the UK, please speak to Peter Robertson or Paul Webb at: hello@dixcartuk.com or to your usual Dixcart UK contact.

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Iya Patarkatsishvili and Yevhen Hunyak v William Woodward-Fisher

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Very lucky!

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