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When two UK charities were left a significant sum by an Englishman living in Switzerland, cross-border complications brought the administrative process to a standstill. Stone King’s specialist team helped the UK executor solicitors and Swiss lawyers negotiate these obstacles, saving the charities up to £14 million in tax.

Dan Harris, Head of Stone King’s International & Cross-Border Team, said: With a gross estate worth nearly £40 million, small margins could save large sums so we examined the cross-border taxation position in detail.”

The tax facts

The deceased had lived in Switzerland for more than 50 years and Swiss tax law led to a tax liability in the region of £20 million for the charities to pay.

Stone King considered the Anglo-Swiss Double Taxation Treaty; what if the deceased could be shown to be common-law domiciled in England & Wales (‘England’)? There would be no Swiss tax to pay on assets in the UK and no tax payable in the UK on gifts to charity.

But common-law domicile is enshrined in complicated case law. The question was whether the deceased’s English domicile of origin (home at the date of birth) had been displaced by a Swiss domicile of choice, involving a two-part test.

The English domicile case

The burden of proof rested with the Swiss tax authority to prove in English law that the deceased had acquired a domicile of choice in Switzerland. English case law also applies some helpful principles, including that the acquisition of a domicile of choice must be ‘unequivocally proved’ and that the decision will be determined by the English courts in accordance with English law.

Stone King also built a robust case that the deceased had not lost his English domicile of origin. The team unearthed a quantity of evidence, supported by affidavits, including the deceased’s wish that English law should govern the devolution of his estate and that substantial assets were left to British based causes close to his birthplace, among other compelling evidence.

Stone King also had to convince Swiss tax inspectors at two high level meetings in Switzerland.

Dan said: “Explaining common-law domicile and case law to incredulous civil law tax collectors was a challenge. They were eventually swayed by the strength of our case and interpretation of the double taxation treaty. Saving so much tax for UK charities is one of the most rewarding experiences of my career.”