Mr A has died intestate domiciled in New Zealand. The majority of his estate will pass to his wife in New Zealand, who is also domiciled there.
She wants to relocate to England, and when she does, it is likely that her English domicile of origin will revive. If a life interest trust is established in New Zealand, with the New Zealand assets, by way of a Deed of Variation, will the trust assets remain as excluded property when her domicile of origin revives, even if she continues to take an income from the trust?
Boyes Turner LLP
I would have thought that the new rules on deemed domicile for those returning to the UK with a domicile of origin would apply here, regardless of her actual domicile under general law.
However, playing devil’s advocate - the statement “she wants to relocate to England and when she does” may have already have ended her New Zealand domicile of choice - at least HMRC may choose this argument should they choose to enquire.
Unlike most countries, New Zealand taxes trusts based on the residence of the settlor, but rapidly increasing transparency measures here will shortly ensure that Inland Revenue informs HMRC of the change of all trust beneficial owner details even if she is not deemed to be a settlor.
Once the domicile of origin revives, the NZ offshore trust (as it will be viewed from the UK once she is no longer UK tax resident) is highly likely to have limited effect for UK tax purposes and will result in further compliance and taxes – including potential inheritance tax, registration on the new UK trust register, taxation of accumulated income, and gains distributed to UK residents.
Lee Harris, Foley Hughes, New Zealand
I believe that you do not lose or abandon a domicile of choice at law, at least “English” law, until you actually physically leave the state of choice, it is not just a question of intention.
In that case it is the law, not HMRC under a deeming provision, which determines the issue.
Quickly, Halsbury sums the position up at Conflict of Law Vol 19 as follows at :
"345. Abandonment of domicile of choice.
A domicile of choice can be lost by abandonment. This process is the exact converse of its acquisition. It is necessary for the person concerned to cease to reside in the country of domicile, and also to cease to have the intention to return to it as his permanent home http://www.lexisnexis.com/uk/legal/#ref68616C735F636F6E666C5F3538_1 1. Absence without the intention of abandonment is of no effect http://www.lexisnexis.com/uk/legal/#ref68616C735F636F6E666C5F3538_2 2; nor is intention without any actual change of residence http://www.lexisnexis.com/uk/legal/#ref68616C735F636F6E666C5F3538_3 3. Both the intention and the act must be demonstrated to be unequivocal, though the evidence necessary to establish abandonment is less than that required to establish acquisition http://www.lexisnexis.com/uk/legal/#ref68616C735F636F6E666C5F3538_4 4."
Note that merely leaving as such is insufficient, the term “abandon” requires that the individual has to leave with no intention to return to it as their permanent home. The matter was well summarised by Megarry J in re F, the Errol Flynn judgment. Whilst there is a bit of leeway between the Dicey definition and that proposed by Cheshire, there s no doubt that in your case, the lady would actually have to leave New Zealand with the intention of abandoning her domicile of choice, or of origin there.
Note that the post millennial HMRC have literally no idea, and do not wish to know what domicile actually is. They prefer to transliterate that into a new administrative law notion of permanent residence, which again is not the same.
Does the old rule that a trust takes its residence from the residence of its trustees no longer apply?
The wishes of the settlor, and indeed the residence or the domicile of the settlor, are irrelevant, are they not?
Julian Cohen, Solicitor