UK residency could deliver taxman Goldsmith fortune

Founding the Referendum Party may have cost Sir James Goldsmith's family more than the pounds 20m he sank into it during the general election campaign. International tax experts believe his decision to renew his residency status in the UK in order to contest the election could result in the Inland Revenue demanding a stake in his assets around the world.

If the tax authorities in France - where Sir James was officially domiciled - or in Spain - where he chose to die - were claiming death duties, experts yesterday said they would levy them on assets only in those countries. However, if the Inland Revenue becomes involved, his heirs will be given an inheritance tax bill based on all his assets worldwide - up to 40 per cent of pounds 1.5bn.

Sir James, 64, died at his farmhouse near Marbella on Saturday from pancreatic cancer. As speculation over an international tax scramble grew, his widow, Lady Annabel, and son Benjamin, 16, returned to the family home in Richmond, London, followed by his daughter, Jemima, and son-in-law Imran Khan, the former Pakistani cricket captain.

The billionaire businessman's body was cremated in a secret ceremony at 1am yesterday, with Lady Annabel, 62, the only member of his family present.

A hearse carried his coffin from his mountainside estate Torre de Tramores, in Benahavis, on the 15-mile journey to the crematorium in Marbella.

It was thought the family decided on a discreet ceremony in the early hours of the morning to escape the attention of the media.

Patrick Robertson, his spokesman, denied suggestions that Sir James had moved from his chateau in Burgundy to his Spanish farmhouse to avoid higher death duties of 60 per cent in France, compared with 40 per cent in Spain.

"He moved simply to get some sunshine and to die in the very same bed he was born in in France in 1933," said Mr Robertson. Nevertheless, the decision may further complicate the final sharing out of the proceeds of his estate, which includes seven homes in England, France, Spain, Mexico and America, among three families.

Although Sir James was domiciled in France, his decision to die in Spain might give the Spanish a claim to some of his fortune. But tax experts believe the Inland Revenue may deem he was domiciled in Britain because of his decision to stand in the election, because of the increasing amount of time he spent in England and because of his family ties here. They refer to a 10-year court battle after the death of Sir Charles Clore, founder of Sears Holdings, in 1979. His lifestyle was truly international and his heirs resisted the UK's claim on his assets. However, the Inland Revenue won and levied inheritance tax on his global estate.

"The Inland Revenue takes into account lots of factors in deciding whether it considers a person was domiciled here - it doesn't simply mean being resident here," said John Whiting, a tax partner at Price Waterhouse. "[The term] relates to where the Inland Revenue believes you had your home. You can be domiciled here even if you live abroad, simply because your parents were." Last night Lord McAlpine, former Conservative Party treasurer who defected to the Referendum Party last year, was named as Sir James's successor as leader of the party.

A new constitution for the party has been prepared since the general election. The intention is that the movement should continue to campaign for a full referendum on the extent of European integration.

Larger than life, page 6

Obituary, page 16