Gulliver’s tax arrangements came under fierce criticism in 2015, during the public accounts committee’s investigation into what MPs described as ‘industrial scale’ tax avoidance at HSBC’s Swiss subsidiary. At the time MPs challenged him regarding his choice of domicile in Hong Kong, when he was working at the bank’s headquarters in the UK.

Gulliver applied for a closure notice under s28A of the Taxes 5 Management Act 1970 (TMA 1970) in respect of an enquiry that HMRC has opened into his tax return for the year 2013-14 to consider whether he was domiciled in the UK. [Stuart Gulliver and the Commissioners for Her Majesty’s Revenue and Customs, [2017] UKFTT 0222, TC05712]

The judge stated: ‘Mr Gulliver is group chief executive of HSBC and it may be that the public will show some interest in his tax affairs. I will therefore make it clear right at the outset that HMRC have not alleged any impropriety on Mr Gulliver’s part: their enquiry is limited to the factual question of whether he was domiciled in the UK for that tax year.’

The FTT heard that in March 2003 HMRC had written to Gulliver accepting that a transfer he had made to a discretionary trust did not attract inheritance tax, and therefore accepting that although Gulliver had a UK domicile of origin he had acquired a domicile of choice in Hong Kong, in 1999.

Gulliver had transferred £273,677 (from funds that were held outside the UK) and the contribution would, therefore, have given rise to an IHT liability of some £4,735 if Gulliver were UK domiciled at any time in the three years leading up to the time of transfer.

In supporting evidence for his claim at this time, his advisers said in a letter to HMRC that Hong Kong was Gulliver’s permanent home and the centre of his business and social life. They acknowledged that HSBC had asked Gulliver to undertake a specific assignment in London but that this was expected to last for only two years after which he would return home to Hong Kong.

HMRC gave evidence to the FTT that at that period it took a ‘risk based approach’ to requests for confirmation of the IHT treatment of lifetime transfers, and did not consider it an appropriate use of resources to engage in a full enquiry into all aspects of Gulliver’s domicile given that the amount of tax in issue was only £4,735.

‘Not relevant’

However, Gulliver has now been resident in the UK for the past 13 years, and in October 2016 HMRC sent him requests for what the tribunal described as ‘a large amount of information and a large number of documents’, requesting answers to 123 questions and the provision of 33 categories of document.

Gulliver has not replied to any of these requests, on the basis that HMRC’s 2003 letter shows that he had acquired a domicile of choice in Hong Kong in 1999. He has told HMRC that he considers that their queries, insofar as they seek to establish whether he acquired a domicile of choice in Hong Kong, are simply not relevant as that has already been established.

However, the tribunal heard Gulliver accepts that it is open to HMRC to ask whether he lost that domicile of choice and has provided HMRC with documents and information that he considers relevant to that issue.

Gulliver’s lawyer said HMRC’s original letter meant it was ‘stuck with’ its determination in regard to his domicile. He also said Gulliver had provided ‘ample evidence’ that he still maintains a residence in Hong Kong, despite spending a large proportion of time in the UK, and has stated he intends to continue to do so.

For its part, HMRC argued that it was not ‘stuck with’ the letter, as this was not a binding contract. It was seeking to establish Gulliver’s domicile for the 2013-14 tax year, and this meant it was necessary to look back over the whole of his life and make wide ranging inquiries into domicile.

Not binding

The FTT has refused Gulliver’s application, finding that a determination of fact (whether made by a tribunal or under a TMA 1970, s. 54 agreement) made in relation to one tax year was not binding in relation to a later tax year. It noted that the principle was even wider than that, because even after a determination had been made for a year it was still open to the taxpayer or HMRC to argue in separate appeals against the facts determined.

The FTT therefore decided that, even if, in 2003, a court or tribunal had decided that Gulliver had a Hong Kong domicile of choice, or HMRC and Gulliver reached a TMA 1970, s. 54 agreement to this effect, there would have been no impediment to HMRC arguing, in proceedings relating to the 2013-14 tax year, that Gulliver had never acquired a Hong Kong domicile of choice.

Since there would be no impediment to HMRC arguing that Gulliver never acquired a Hong Kong domicile of choice in any appeal relating to the 2013-14 tax year, the FTT could see no reason why HMRC should be precluded from using their powers of enquiry to seek to establish this.

Meg Wilson, Wolters Kluwer tax writer, said: ‘This case highlights that neither HMRC nor taxpayers are bound by previous determinations of facts in respect of different tax years.’

Stuart Gulliver and the Commissioners for Her Majesty’s Revenue and Customs, [2017] UKFTT 0222, TC05712 is here.