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HMRC loses residency tax tribunal

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29th Nov 2013
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HMRC has won most of the important tribunal cases about taxpayer residency in the past few years. But all is not lost for taxpayers, advises Gabelle, after one taxpayer recently won a residency case involving a £29m dividend.

The case (James Glyn versus HMRC, TC03029, first-tier tribunal), concerned a taxpayer who, after tax advice, left the UK to become non-UK residence and subsequently received a sizeable dividend of £29m.

HMRC argued that Glyn remained UK resident during the period so that the dividend was subject to UK tax and said that he had not shown a "distinct break" from the UK because he had not shown a sufficient loosening of his family and social ties.

It also argued that Glyn’s visits to the UK were for a “settled purpose” and he retained a six-bedroom family home in North London. 

Although he had a home in Monaco, the taxpayer frequently returned to his London home to observe Friday night family dinners and other Jewish holidays with his wife and UK resident adult children.

HMRC placed an emphasis on these points, even though Glyn had severed his UK business ties, saw very little of his friends in the UK and had only 44 days of UK presence (excluding travel days) during the tax year in question.

The tribunal decided that Glyn had The Appellant made a “distinct break” from his previous life in London and severed “virtually every active business connection”.

Also in year 2005/2006 he spent about 65 days in the UK each year, “manifestly fewer” than the residency threshold in HMRC’s IR20 guidance.

The tribunal concluded that Glyn was resident in Monaco in the tax year 2005/2006 and was therefore not resident in the UK.

Residence and domicile are the two main factors that need to be considered when deciding whether, or to what extent, an individual is liable to tax in the UK. Accountants have long complained that residence rules are complicated and confusing. There have also been legal disputes over residency, one of the most-high-profile cases involving Robert Gaines-Cooper, a Seychelles-based billionaire.

In an effort to clarify matters the government has introduced a new statutory residence test to to determine whether an individual is classed as a UK resident for tax purposes.

Under the new test, which has applied since 6 April, an individual’s residence will depend partly on the number of days spent in the UK, but also on that person’s connections to the UK. The ruling will consider other factors, such as whether that person owns property or has business interests in the UK, or where that individual’s family is resident.

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Replies (6)

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By grwilson45
02nd Dec 2013 15:27

Residence

HMRC should have known better than to tackle on obvious non-UK resident.

Under the new rules the taxpayer would very clearly be non-UK resident.

This case is quite a contrast to the Rumbelow case reported last week here.

 

 

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By carnmores
03rd Dec 2013 14:34

i disagree why am i wrong

under the SRT in my opnion he is resident as he has a poperty available for use  isnt that one of th etests or have i missed something

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Replying to PERMON:
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By grwilson45
03rd Dec 2013 15:26

Residence
The statutory residence tests only came into force on 6 April 2013 unless I am very much mistaken (as Murray Walker of Formula 1 fame might have phrased it)

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By carnmores
03rd Dec 2013 15:38

look at what you said

Under the new rules the taxpayer would very clearly be non-UK resident.

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By the_Poacher
04th Dec 2013 07:37

UK passport
An additional test - UK passport, UK taxpayer?

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Stepurhan
By stepurhan
04th Dec 2013 08:38

Day counting is not all

On the new day counting rules, he would definitely be non-resident. However, those only come into play once a person has made a break with the UK. The question at point is whether they did that.

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