THE SUPREME COURT has found in favour of HMRC in the long-running Gaines-Cooper v The Commissioners for Her Majesty’s Revenue and Customs case over the former’s tax residency status. The international businessman lost his long-running dispute with HM Revenue and Customs, with the UK’s highest court ruling in favour of the taxman in a contentious dispute over the interpretation and application of residency guidance.
The dispute centred around IR20, which was the authority’s guidance on what constitutes residency for tax purposes.The ruling comes in a judgment handed down by the Supreme Court today. Controversy surrounds the understanding of the phrases “residence” and “ordinary residence” for the purposes of an individual’s liability for UK income and capital gains tax.
Explaining the reasoning behind its 4-1 majority decision the court said that while guidance on how to achieve non-residence “should have been much clearer”, the guidance, when taken as a whole, informed taxpayers that one would need to leave the UK permanently, indefinitely or for full-time employment, and do more than to take up residence abroad and relinquish ‘usual residence’ in the UK. Information was also provided that subsequent returns to the UK had to be no more than ‘visits’ and that any ‘property’ retained in the UK by the taxpayer for their use could not be used as a place of residence.
Gaines-Cooper migrated to the Seychelles in 1976, and spent less than 91 days each year in the UK in accordance with non-domicile residency rules. He owns a house in England, which is occupied by his second wife and son. He keeps classic cars and a collection of paintings at the property, and sent his son to a British public school. He also had his will drawn up under English law.
It was Gaines-Cooper’s links with England that led the Court of Appeal to find that the UK remained Gaines-Cooper’s “center of gravity of his life and interests” – a decision which has prompted tax experts to accuse HMRC and the courts of “moving the goalposts.”
Gaines-Cooper said today: “The judgement 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. My next step is to seek the views of my legal advisers with a view to referring my case to the European Court.”
In the near future the government is set to introduce a Statutory Residence Test in April next year which we trust will clarify the rules surrounding residence and domicile in the UK.
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