Tax Residence continues to be an interesting area – and an active one for HMRC challenge.
Having burned many years of their own guidance in taking Gaines-Cooper to the highest court in the land – thereby ignoring their own ‘safe haven’ guidance in IR20, HMRC have made another challenge in the case of James Glynn. In this case, HMRC HAVE LOST, [at least at the First Tier Tribunal]. The verdict of the judges, over a lengthy(?) day hearing was [simplifying] that the taxpayer had done enough to demonstrate a ‘definite break’ in lifestyle, so was entitled to look at a ‘day counting’ approach to tax residence.
Interestingly, the long memories of HMRC appeared to consider the idea of ‘available property’ relevant – a concept which had been abolished, but is now re-emerging in the new statutory tests.
Pleasingly, the judges looked at the case based on its specific facts. They took into account factors such as social life, family and religious tradition, changes in business and investment interests, the conduct of the taxpayer’s wife and her charity work etc., – in fact the whole picture of his lifestyle. This resulted in the conclusion that Mr Glynn had deliberately altered his lifestyle to such an extent that there was a ‘definite break’.
Again, hopefully this gives clarity taxpayers can depend upon. Further the court went on to say that the fact that part of the motivation was tax avoidance was irrelevant, because the question of motivation should not have an impact on what is (especially under the new statutory rules) a question of fact. Often the question of fact may not be an easy one, but one to be weighed in the balance, based on the complete picture.
Lessons to be learned include:
- The importance of reviewing all the facts and assembling appropriate technical arguments.
- The great depth to which HMRC went in investigating detailed elements of the taxpayer’s lifestyle.