Reply to readers’ queries published by Taxation magazine in August 2023
Reader’s query
My client was a very successful business woman with business interests all over the world and an international investment portfolio. She had a taste for adventure and two years ago went on a solo trek in South America. Unfortunately all contact with her has been lost and we have to assume that she has died – although there is a remote possibility that she has been kidnapped or started a new life for herself. Her family are left in limbo and they are considering applying to the court for a certificate of presumption of death.
My question is how this fits into the statutory residence test. I know that there are rules which deal with the year of death (otherwise people who die on a long round the world cruise could be considered to be non-resident) but what happens if the date on the certificate is several years after the date on which she was last seen?
This might seem a macabre question but if she were non resident at or before the date of her death her tax position might be quite different.
Has anybody dealt with this before who can offer me some pointers?
Reply to reader’s query
It is understood that Lost’s client has been a missing person for two years after she went on an adventure in South Africa, and her family are considering applying for a certificate of presumed death.
First of all, it is worth noting the seven-year rule. Under normal circumstances, if a person has been missing for seven years or more, an application may be made to the court for a Declaration of Presumed Death.
The presumed death may, in certain cases, be granted by the court earlier than 7 years if there has been clear evidence that there is little chance of the missing person being alive, typically if the individual went missing at sea or was unfortunately caught in a terrorist attack.
Lost and the client’s family should, therefore, gather necessary evidence before they make an application. In any event, specialist legal advice should be sought prior to an application being submitted. Thoughts must also be given to what if the court is not satisfied by the evidence submitted and refuses to grant the certificate.
If the certificate of presumed death is not granted, the missing client remains a living individual. No one is able to deal with her affairs unless and until a person, who has sufficient interest in the missing client’s property (e.g. spouse, child, parent or sibling), applies to the High Court and a Guardian Order is granted. The guardianship gives the authority to deal with the missing client’s affairs, in a very similar way in which an attorney does.
Based on the above, during the 7-year period (assuming that a certificate of presumed death application cannot be granted until after 7 years), the missing client remains a living individual. Given her physical absence from the UK, her UK tax return can be completed accordingly.
Once the certificate of presumed death is granted, probate for the estate may start. It is worth noting that the client’s guardian cannot write up a Will on behalf of the missing client. So, Lost and the guardian must ascertain whether the missing client has had a Will; otherwise, the missing client is likely treated as having died intestate. As for the date of death, the most straightforward approach is to simply use the date on the certificate.
Once the date of death is determined, the Will located, the missing client’s domicile ascertained and the personal representatives tax residence status confirmed, the rest is relatively straightforward by following the normal tax rules for a deceased person’s estate.
As for the specific question asked by Lost in relation to the Statutory Residence Test for the missing client, the entire period may have to be split into two parts, i.e. before and after the certificate of presumed death is granted. Depending on the date on the certificate of presumed death, hmrc guidance (at RDRM11900) can then be followed to determine the tax residence status of the missing client.
This article is provided for general information only. It does not constitute tax, legal or other professional advice, and should not be relied on as a substitute for specific advice based on your particular circumstances.
