FT: Tax exile loses appeal over residency

Financial Times October 19, 2011 8:03 pm
Tax exile loses appeal over residency
By Vanessa Houlder
Robert Gaines-Cooper, an international businessman, lost an appeal in the Supreme Court on Wednesday in the culmination of a long-running court battle over UK residency that is likely to result in hundreds of other tax exiles facing bills for back-dated tax.
Mr Gaines-Cooper tried in 1976 to flee high taxes in Britain for the Seychelles but has been embroiled in a dispute with Revenue & Customs since 1998 over whether he ever shed his UK residency.
By highlighting widespread confusion over British residency rules, the case has been the catalyst for a statutory residence test that is due to be introduced next April.
The case revolved around the Revenue's guidance on residence, outlined in a booklet called IR20. Mr Gaines-Cooper said he had stayed away from Britain for enough days every year to qualify as a non-resident. But the Revenue argued that counting days was irrelevant because Mr Gaines-Cooper had not left Britain "permanently or indefinitely" by making a distinct break.
The Supreme Court, by a 4-1 majority, dismissed the appeal on the grounds that a "proper construction" of IR20 did not support Mr Gaines- Cooper's case and the argument that the Revenue had departed from the IR20 guidance was "far too thin and equivocal".
Although the guidance on how to achieve non-residence "should have been much clearer", it considered that a sophisticated taxpayer would have concluded that he had to make a "distinct break" from the UK to become non-resident.
But Lord Mance dissented, saying no requirement for "a distinct break" had been expressed and other factors, including the day-count proviso, pointed away from such a requirement.
Mr Gaines-Cooper said he planned to seek legal advice on whether to appeal against the ruling: "The judgment I have received today is a disappointment to me and to my family. I also consider it to be a blow for all UK taxpayers who have relied on HMRC's published guidance when planning their tax affairs."
Several advisers said they were not surprised by the victory for Revenue & Customs, partly because Mr Gaines-Cooper had maintained extensive social and domestic ties to the UK in regular visits that included Royal Ascot and shooting parties.
"Tax exiles will urgently need to review their affairs in the light of this ruling.
"This ruling does not give taxpayers the certainty that they need and is fundamental to the fairness of the tax system. This case proves that HMRC guidance is not reliable if it is badly drafted."
Mike Warburton of Grant Thornton, professional services firm, said the Supreme Court ruling would affect the outcome of hundreds of cases that were still in dispute.
"With a significant number of enquiries still open into the affairs of internationally mobile employees impacted by this judgment, we hope HMRC adopts a practical approach in closing these enquiries down before the new rules come into effect next April."
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Reply to
sufaud

"Tax exiles will
"With a significant number of
I am interested in the idea that he is considering an appeal against the decision. To which court does he contemplate appealing?
There is no appeal from the Supreme Court.
It is too late to request a reference to the ECJ, the case being over in domestic terms.
I cannot see that any right under ECHR is engaged (not that one can 'appeal' from the Sup Ct to the ECtHR anyway).
Reply to
Andrew McGee
I wondered about that, too. Possibly the court in the Seychelles, as presumably any collection proceedings will need to be launched there? Or, as you surmised no doubt, it was all bluster.
Reply to
GB
"Tax exiles will
"With a significant number of
I had never heard of any requirement to stay away "permanently or indefinitely". There must be thousands of people working overseas who are regarded as non-resident on this basis even though they do ultimately plan to return to the UK again at some stage in the future.
It sounds to me as if there is some confusion with being non-resident and non-domiciled. Becoming non-domiciled in the UK is much more difficult, and that does require you to break all links with the UK I wonder if the FT are using the wrong terminology in their reporting here, and the case was actually about domicile?
Chris
Reply to
Chris Blunt
Chris Blunt posted
That's essentially what Gaines-Cooper is complaining about. Everybody understood the rules to be pretty much what you state, and in fact that was how they were set out in the HMRC guidance of the time (the IR20 booklet). Then HMRC came back to him and said, "Actually we've just thought of another criterion for residence - you have to have made a distinct break from the UK by not owning any property there and not having any friends or family there. We didn't bother putting that in IR20 because we thought you might know it already, although of course we did put a lot of *other* stuff in IR20 that you probably knew as well. And yes, we did give you and everyone else an undertaking that we would follow IR20 in residence decisions, but what we really meant was we would follow IR20 plus some other criteria that we didn't tell you about. So I'm afraid you have to give us all this money."
The directors of any commercial organisation following such a policy would be in jail before their feet touched the floor. But this is HMRC. Motto: "We can do whatever the fuck we like."
No, it wasn't. The FT report is correct. See the decision: BAILII:
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Here's a Telegraph report:
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Here's Accountancy Age:
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Reply to
Big Les Wade
I think you have summed up the case very nicely. However, this could bring in quite a bit of dosh for the treasury.
> > The directors of any commercial organisation following such a policy > would be in jail before their feet touched the floor. But this is > HMRC. Motto: "We can do whatever the fuck we like." > >> I had never heard of any requirement to stay away "permanently or >> indefinitely". There must be thousands of people working overseas who >> are regarded as non-resident on this basis even though they do >> ultimately plan to return to the UK again at some stage in the >> future. It sounds to me as if there is some confusion with being >> non-resident >> and non-domiciled. Becoming non-domiciled in the UK is much more >> difficult, and that does require you to break all links with the UK I >> wonder if the FT are using the wrong terminology in their reporting >> here, and the case was actually about domicile? > > No, it wasn't. The FT report is correct. See the decision: > BAILII:
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> > Here's a Telegraph report: >
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> 9/Tax-exile-loses-to-HMRC-in-landmark-ruling.html > > Here's Accountancy Age: >
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> s-supreme-court-hearing
Reply to
GB
GB posted
You say "However ... " as if bringing in money for the Treasury were automatically a good thing. Seeing what they spend it on, I really do not agree.
Reply to
Big Les Wade
Wonder if Blair or Brown, currently spending large amounts of time overseas (filling their boots), are taking advantage of the residency rules.
Now that would be the final insult having, between them, turned us into one of the most highly taxed nations on the planet.
Reply to
allantracy
In article , snipped-for-privacy@nowhere.com says...
You've summed up the case and my understanding of how HMRC seems to have changed the rules very nicely. It has put my own situation under some doubt now, as I have been away (apart from 14 days 9 months ago) for over one year now, and was going to start the process for trying to stop paying tax shortly.
Reply to
David D S

"Tax exiles will
"With a significant number of
The problem that GC has is that he isn't working overseas.
He's living overseas whilst still running his UK based businesses remotely
This was the approach that he first tried.
It could be that this article is a victim of mis-reporting
tim
Reply to
tim....

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