It is well known that in general terms, IHT rates, exemptions and reliefs apply on equal terms throughout the UK. This applies also to domicile status as is confirmed by s721(3) ITEPA 2003 which reads 'Any reference to being domiciled in the United Kingdom is to be read as a reference to being domiciled in any part (my emphasis) of the United Kingdom'.
But what of the non-tax position where the two systems differ? For example, under the Scottish system of Confirmation (the equivalent of Probate which applies in England and Wales) the spouse and children of a deceased person who died domiciled in Scotland may have legal rights against the deceased’s property. The rules are detailed in HMRC's IHT manual (IHTM12229).
'Spouse' for this purpose may include 'a co-habitee under habit and repute' (see IHTM 11032).
The question of whether an individual died domiciled in England & Wales or Scotland may therefore make a significant impact on the administration of the estate, and the point was examined in the case of Anderson (Executor of Muriel S Anderson) v IRC (1998 STC 43)
Mr Anderson had lived all his life in Scotland, then at the age of 64 he retired and moved to Cornwall, where he died eight years later. His ashes were spread in Scotland. His Will had been executed and retained in Scotland, where all his relatives (except his daughter who joined him in Cornwall) were still based. During his lifetime he had expressed no view as to whether he wished to return to Scotland or not.
Had he acquired a domicile of choice in England by the time of his death?
The Special Commissioner held that it was not inconsistent that an elderly Scottish man would wish to move to England for his retirement, but would have no intention of giving up his Scottish domicile. Moreover, the fact that his Will was still held in Scotland and his ashes were spread in Scotland (as was his wish) demonstrated his desire to stay a Scottish domiciliary.
It was held that Mr Anderson died domiciled in Scotland and the case demonstrates the difficulty of establishing a fresh domicile of choice. Significant here was the fact that the period of eight years was considered short - a point to note in view of the fact that we are in general living longer these days...
In conclusion, practitioners acting for a client who has moved, and indeed in many cases retired, from Scotland will need to consider the domicile position carefully – I write this as someone who was born in Glasgow but moved to the south coast at a very early age!
Brian Ogilvie FCCA – freelance tax lecturer and consultant