Multimillionaire loses controversial residency claim
As the Supreme Court rules against businessman Robert Gaines-Cooper's attempt to prove he is not resident in the UK, Littlejohn Senior Tax Manager, Barry Luscombe, reviews the landscape for prospective tax exiles.
The European Court of Justice may be the next step for Gaines-Cooper in his fight to prove he is not a UK resident for tax purposes. The multimillionaire claimed to have planned his residency status based on Inland Revenue guidance (document IR20), and advice from some of the country's most prestigious tax advisers. He had placed particular reliance on the 90-day test as being the amount of time he could spend in the UK each year.
While criticising the HMRC's published guidance for being insufficiently clear on how to achieve non-resident status, the Supreme Court nevertheless ruled 4-1 against Gaines-Cooper in the latest instalment of this long-running saga.
The Court reaffirmed the decisions of the lower Courts that an individual purporting to have left the UK needed to show a 'distinct break' in the pattern of his life. The Court said those attempting to become non-resident must prove:
- they have left the UK in a more profound sense than that of travel, namely permanently or indefinitely or for full-time employment
- they have done more than simply take up residence abroad
- they have relinquished their 'usual residence' in the UK
- any subsequent returns to the UK are no more than' “visits'; and
- any ‘property' retained by them in the UK for their use is used only for visits rather than as a place of residence.
No doubt in part due to the controversy this case has caused, the Government has recently been consulting on a statutory test for residence. The rules have not yet been finalised, but the test is likely to take into account ‘connecting factors' with the UK and introduce a sliding scale of days that can be spent here. The more connecting factors, the fewer days allowed for UK visits.
Gaines-Cooper says his case is about “…fighting for clarity in the UK tax system and for fair and consistent treatment of all taxpayers so that we can all plan our tax matters with certainty, pay the tax which is due and get on with our lives.” If the result is a clear statutory test, future tax exiles will owe him a debt of gratitude for his tenacity and deep pockets.
If you have any concerns about your residence status, please speak to your normal contact or to Barry Luscombe on 020 7516 2204 or email bluscombe@littlejohnllp.com
