Court of Appeal rules in favour of HMRC on 91-day UK residence rule
The Court of Appeal has upheld the right of HM Revenue & Customs to tax a wealthy businessman who has lived in the Seychelles since 1976.
Robert Gaines-Cooper complied with HMRC rules to spend no more than 91 days in the UK per year. However, the court ruled that tax exiles have to show they have really left the country before the 91-day rule applies. If they have continuing connections with the UK then the rule does not apply.
In the linked cases of R (on the application of Davies and James) and R (on the application of Gaines-Cooper) [2010] EWCA Civ 83, the judges found that HMRC’s interpretation of tax guidance booklet IR20 was correct, and that Gaines-Cooper had not sufficiently severed his ties with the UK.
They rejected claims that HMRC has changed the rules on non-resident status.
Lord Justice Moses said: “[Mr Gaines-Cooper] needed to establish a distinct break from social and family ties and the Revenue asserted, and maintains its assertion that he did not make that break either in 1976, when he claims to have left permanently, or thereafter.”
In the linked judicial review, Robert Davies and Michael James unsuccessfully argued that they should be treated as non-resident under IR20 for the tax year 2001-2002 because they were in full-time employment in Belgium for a year from April 2001. Moses LJ said that people would be treated as not resident if their “absence from the UK and employment abroad both last for at least a whole tax year”. He held that, in Davies and James’ case, they did not gain non-resident status.
Sean Drury, international mobility partner, PricewaterhouseCoopers, says: “The judgment clearly emphasised that HMRC should rely on UK tax residency guidance as outlined in IR20 and that employees were not required to sever family or social ties with the UK. Although the taxpayers lost on the facts of their cases, the court ruled that the guidance HMRC had issued was binding on HMRC.”
