The Supreme Court recently upheld the Court of Appeal’s decision that Mr
Gaines-Cooper was a resident of the UK despite spending the majority of his
time in the Seychelles.
Mr Gaines-Cooper’s main argument centred on the application by HMRC of their guidance set out in the IR20 booklet on residence. This has since been replaced by HMRC6.
Despite following HMRC’s guidance on residence, Mr Gaines-Cooper was found to be UK resident. The case revolved around whether there was an ‘implied’ requirement for there to be a distinct break from the UK in order to become non-UK resident.
The case highlights the fact that HMRC guidance is not the law, and following it will not necessarily provide protection. Similar principles have applied in the taxpayers’ favour in recent cases on ‘reasonable excuse’ which have found HMRC’s guidance to be stricter than the actual wording of the legislation.
Going forward, the new statutory rules on residency should provide taxpayers with more clarity, however for prior years the case law principles will still apply.
The matter of UK residency is a common thread in the tax tribunal and courts over recent times.
The Gaines-Cooper case continues to be the main showpeice in relation to UK nationals leaving our shores.
However, professional advisors assisting overseas nationals coming to the UK should consider the case of Tuczka. Which has just been heard by the Upper Tribunal in favour of HMRC.
Tax residency remains a complex area and we will be glad to assist on 0113 2443502
HM Revenue and Customs have updated the guidance on residence, domicile and the remittance basis contained in HMRC6.
Since 6 April 2008, in determining how many days a person has spent in the UK for the purposes of the 183 day test and 91 day test, taxpayers have been able to exclude days in which they were not present at midnight.
However, the new guidance in HMRC6 suggests that where a person spends substantial time travelling to and from the UK, HM Revenue and Customs may seek to look at all the days in which a person was in the UK even where they were not present at midnight. This appears to build on the recent case of Mr Gaines-Cooper.
The 91 day test is now discussed comprehensively in the coming to the UK section and rather limitedly in the leaving the UK section (in fact it is only referred to here where a person leaves to work abroad full-time), thus the implication is that HM Revenue and Customs now see the 91 day test as a way of bringing people within the UK tax net rather than a way of letting people out of it.
Please call Eaves & Co, Specialist Tax Advisors if you have any UK tax residence issues.