Are you the next Richard Burton?

Richard Burton’s estate fell foul of HMRC and UK inheritance tax was due even though he had lived abroad for the previous 27 years before his death.

Background

Born and raised in Wales, Burton went on to become one of Britain’s finest stage and screen performers and was equally as famous for his two marriages to Elizabeth Taylor.
Burton was born in Wales and lived for many years in the USA before moving to Switzerland 1957 with his then wife, Sybil. He spent the remaining 27 years of his life based there, splitting his time largely between the Alpine clean air and the United States. I am sure the clean air, mountains and exceptional lifestyle offered by Switzerland were major factors, but as we all know, the very wealthy often have good tax reasons for residing there too. Burton was no exception. He didn’t own any assets or derive any income from the UK and thought he’d be able to legitimately avoid UK inheritance tax by dying in Switzerland. Burton died at the age of 58 in 1984 at his home near Geneva, Switzerland.

HMRC Claim

The UK tax authorities made an inheritance tax claim on his estate on the grounds that Burton had never actually been able to relinquish his UK Domicile.
Supposedly he had requested for the burial of his body in a red suit, together with a copy of Dylan Thomas’ poems, but the main likely factor was something that he did many years previously when he purchased burial plots for himself and Liz Taylor in Pontrhydyfen, Wales. This enabled the UK taxman to claim that Burton had kept his ‘emotional ties’ to Wales and always intended to return to the UK and was therefore deemed UK domicile.
As a result, his worldwide estate of around £5 million was decreed subject to UK Inheritance Tax (IHT) and around £2.4m was duly taken to pay his dues.

Losing Domicile

What this tells us is that trying to shake off domicile in order to avoid UK inheritance tax can be very difficult. For expats like Burton, the situation can be very complicated. It looks as if Burton (presumably in conjunction with his advisers) did everything right to claim Swiss domicile except for the burial plot, which he may even have forgotten he’d bought. Even if he hadn’t, I am sure that no one spotted it as a potential fly in his tax strategy ointment.

Domicile and inheritance tax planning
You should seek professional advice for domicile and inheritance tax-related problems. Here is a basic plan to consider.

• List your assets in terms of value, owner, provider (where appropriate), where they are based and how they fit into your will – you can download a useful IHT calculator Here
• Seek a professional opinion on current IHT/Succession tax liability
• Weigh up the pros and cons of your strategy and implement any changes that you think will give you the best chance or even certainty of mitigating future taxation
• Make sure that your plan contains the flexibility to be altered as and when circumstances and/or tax legislation changes
• Update details of your assets on a regular basis
• Regularly review your strategy with your adviser
• Don’t buy burial plots in the UK or ask to be buried in a red coat with books of poems, or have your coffin draped in a Union Flag!

Law Changes

Even with what may appear to be the most effective strategy at any given point in time, domicile and how it affects inheritance tax and succession planning is a moveable feast. Governments change legislation, individual’s circumstances are fluid and conflicts can arise between different country tax codes.

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About the author 

Colin MacGregor is an independent financial advisor working across Europe for Professional Investment Consultants S.A. (Europe) www.pic-europe.com.

He has over 10 years of experience in the advisory sector and currently resides in Prague, Czech Republic.