The long running saga of businessman Robert Gaines-Cooper’s claim to have ceased being UK resident has finally ended at The Supreme Court. In the final appeal available the taxman won the day. The key decision was that in order to lose UK tax residence a distinct break from the UK is required.
Mr Gaines-Cooper argued that HMRC had departed from its previous “prevailing practice” as set out its booklet IR20, and that he had “a legitimate expectation” to treated under what he alleged was the ‘old rules’. The Supreme Court dismissed the appeals. The judges found that IR20 could not be interpreted in the way contended by Gaines-Cooper.
The judges reiterated the legal test, based on case law, for becoming non-resident. They stressed the importance of a “distinct break” or change in “the pattern of the taxpayer’s life” – to establish the loss of UK residence. It doesn’t quite require a “severance of social and family ties” but does entail a “loosening” of such ties. Consideration of residence issues necessarily requires a “multifactorial evaluation of the taxpayer’s circumstances” and lifestyle.
A statutory Residence test is expected to be enacted next year: with the aim of bringing greater certainty. It will have three tests. Two will be clear cut, at either extreme. But the middle test – likely to be relevant in all the cases that are currently contentious anyway – will still require the “multifactorial evaluation” approach.
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