| Two cases on residence of individuals for tax | | | | thought that there had been a change of policy by |
| purposes have recently been widely reported in the | | | | HMRC in relation to residence issues at some time |
| national press; in each case, the cases reveal what | | | | after 2000. That however is as far as any |
| are generally considered to be new developments, | | | | satisfaction goes for taxpayer. The Court |
| although HMRC denies that this is the case. | | | | constructed a huge inverted pyramid on small |
| | | | | nuances and one or two vague expressions in IR20 in |
| One of the cases is Gaines-Cooper v CIR in which Mr. | | | | order to find for HMRC. If the tax professionals had |
| Gaines-Cooper sought judicial review of the decision | | | | not spotted the importance of these nuances and |
| of HMRC that he was resident and ordinarily resident | | | | expressions, what hope could there possibly be for |
| in the United Kingdom from 1993/94 onwards. He | | | | the ordinary individual for whom tax is one of the |
| argued that he had relied on HMRC's guidance in their | | | | most bewildering topics in the world? |
| own booklet IR20 and HMRC were now applying | | | | |
| principles which were not set out in that booklet. | | | | The principles governing tax residence in the UK, as |
| Furthermore, they were applying those principles | | | | we now understand them from this decision, are as |
| retrospectively in his case. | | | | follows: |
| | | | | |
| To a certain extent, the problems which Mr. | | | | 1. The abolition of the ‘available accommodation |
| Gaines-Cooper and numerous other taxpayers are | | | | rule' was effective for all tax purposes. As a result, |
| experiencing in relation to tax residence date back to | | | | from 1993/94 onwards anyone (not just a |
| 1993 when the ‘available accommodation rule' | | | | temporary visitor) who comes to the United Kingdom |
| was abolished. Under this rule, any person who visited | | | | for a short stay during any tax year will not |
| the UK for just one day and who had available | | | | automatically be resident for that year if he or she |
| accommodation here would be treated as resident | | | | has a home here. But that does not mean (as one |
| for the whole tax year in which the visit was made. | | | | might otherwise have thought) that one simply |
| | | | | determines residence by counting the number of |
| The abolition of this rule was made in a rather | | | | days spent in the United Kingdom in each fiscal year. |
| unsatisfactory fashion. The only statutory change | | | | Residence is to be determined by reference to a |
| was in section 336, Taxes Act 1988 which relates to | | | | number of factors, of which the number of days |
| temporary visitors to the United Kingdom. Under the | | | | spent in the United Kingdom is just one. Exactly what |
| amendment to section 336, the residence status of | | | | the factors are is still not clearly defined. |
| visitors is to be decided from 1993/94 onwards | | | | |
| without regard to any living accommodation available | | | | 2. Where booklet IR20 used to refer to the |
| in the United Kingdom for their use. So if a visitor to | | | | requirement that you must have left the UK |
| the United Kingdom has a home here, he or she may | | | | permanently, what this meant was that you must |
| now come to this country for a short stay (under 91 | | | | sever your social and family ties which you previously |
| days) and will not simply by virtue of having the | | | | maintained within the United Kingdom. This means |
| home here be resident in that year. This left open | | | | that, although it was previously thought that tax |
| the question of to what extent the available | | | | residence is decided on a completely individual basis, if |
| accommodation rule had been abolished on a wider | | | | the taxpayer's spouse, partner or infant children |
| basis – for example did the rule still apply to | | | | remain in the UK, it will be very difficult if not |
| those who had a previous history of residence in the | | | | impossible to claim that he or she has become |
| United Kingdom (and so were not just visitors to the | | | | resident abroad. |
| United Kingdom), or had it equally been abolished in | | | | |
| these cases as well? It was generally thought that | | | | 3. The easiest way to become non resident has |
| the rule had been abolished for all purposes, and that | | | | always been, and still is, to take up full time |
| was certainly how the press releases at the time | | | | employment abroad. In this case, it is not necessary |
| seemed to read. | | | | to sever UK social and family ties. However if |
| | | | | someone goes abroad for full time employment, but |
| Mr. Gaines-Cooper had a substantial house in the | | | | the employment does not commence immediately |
| United Kingdom and his wife and children also lived | | | | after departure, he or she will not start the |
| there. He was an international businessman and spent | | | | non-resident period until the full time employment |
| most of the year out of the country. His days of | | | | starts (a point which might be of crucial significance |
| presence in the United Kingdom were always below | | | | for capital gains tax purposes where in most cases |
| 91 days per annum on average. He therefore | | | | no split year treatment applies). |
| contended that he should be treated as not resident | | | | |
| in the United Kingdom for 1993/94 onwards and the | | | | 4. As regards ordinary residence, in the separate |
| Revenue guidance in booklet IR20 did nothing to | | | | appeal case of Dr Andreas Tuczka also recently |
| suggest that this would not be the case. | | | | reported, it was held that a person who came to the |
| Unfortunately, HMRC said that he had misunderstood | | | | United Kingdom to work became ordinarily resident in |
| the guidance and they considered that he remained | | | | the UK soon after arrival here even though at the |
| resident here because he had substantial family and | | | | time it was not clear that he would remain in the UK |
| social ties with the United Kingdom. | | | | for 3 years or more. |
| | | | | |
| | | | | The significance of all the foregoing cannot be |
| You will look in vain through booklet IR20 for the | | | | overstated. There have been many instances of |
| words ‘family and social ties'. | | | | wealthy people of high profile (e.g. businessmen, pop |
| They do not appear at all. So it is hardly surprising | | | | stars and film stars) who have in the past taken up |
| that Mr. Gaines-Cooper is very bitter about his | | | | residence overseas, but have retained a home in the |
| treatment by HMRC. In the judicial review application | | | | United Kingdom which they visit for less than 91 days |
| at the Court of Appeal, it is gratifying to see that | | | | per annum. We can expect such individuals to be |
| the Court examined IR20 in great detail and listened | | | | next on HMRC's list for review of their residence |
| attentively to the expert witnesses from the | | | | status. |
| profession who all with one voice said that they had | | | | |