HMR6 and UK house purchase
My UK born client who has lived in the West Indies for several years and intends to continue doing so, has recently sold his UK house that he let out, and used twice a year himself for a few weeks. He has now bought another house but does not intend to rent this one out. He will continue to come to the UK a couple of times a year for a holiday. His wife resides with him abroad. Para 2.2 of hmrc6 is alittle worrying. Can this new house tie him in sufficiently to the UK so that HMRC question his status?
Any thoughts on this gratefull received.
you are right to be concerned
The HMRC rules regarding days spent in the UK refer only to individuals who have left the UK.
HMRC sucessfully argued in Gaines Cooper that the individual had not actually left the UK. They argued that he had retained sufficient ties with the UK so that he had not actually left the UK, despite not actually being physically resident in the UK for the prescribed 91 days over a 4 year period.
Your question is not sufficiently detailed to indicate whether or not your client has retained ties to the UK. Clearly your client passes the residency test, over the four year period indicated by HMRC guidance. However, if, like Gaines Cooper, they decide that he has retained sufficient ties with the UK so as to not actually become NR, then the physical residence is not relevant.
That said, from the sounds of it, your client sounds like he has no actual ties with the UK in terms of schooling of his children, membership of clubs, business interests, and thus has been accepted as NR.
Look at the tests in the Gaines Cooper case. One of the tests incidentally, was the fact that he had retained a UK property which was for his own use (ie not rented out)
Sorry, but if I was a HMRC Inspector, I would be suspicious...
If someone told me that a non-resident owned a property in the UK, which was not let out, but used solely for a few weeks each year by said non-resident when vacationing in the UK, I would be suspicious.
There are substantial costs in owning a property that is 'allegedly' empty for 45-weeks (+/-) a year, as well as things like insurance which would be very difficult to obtain on such a property.
I would be asking myself why anyone would do this and straightaway be thinking that maybe they use the property a lot more than a few weeks each year (i.e. they only appear to be non-resident and are in-fact possibly dual resident in the UK/West Indies) or alternately that the property is actually being let out, but the income is undeclared.
Although there MAY be a perfectly reasonable justification for this (such as security or asset appreciation), there are far more reasons why an HMRC Inspector would be suspicious.
I would be asking your client a few more questions and MAKE SURE I GET WRITTEN ANSWERS as this doesn't sound right.
.
i think you may have missed the point about the 90 day rule.
this rule only really applies to people who have left the UK.
if this individual has been resident in the past HMRC may seek to establish that he has not actually left the UK.
If the numbers are significant you could consider an opinion from someone who specialises. Its not a matter that I would personally like to determine. Its possibly THE most difficult advice to give in certain circumstances. Not ideal I'm afraid.
what does para 2 of HMRC6 say?
It appears from what you say he is resident in the 'West Indies' as time spent in UK is minimal, i.e. asumme 'holiday' means approx 2 weeks?.
This being the case, I would have thought it unlikely they can question his residency. In Gaines Cooper I think he spent more time in UK then he did in Seychelles so determining residence was not clear cut.
I assume he pays his taxes in the 'West Indies' ? and is being treated as resident there.
However, the West Indies, as far as I am aware is not a country but made up of a number of territories. Has your clients 'territory' got a DTA with the UK?