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Interview: Robert Gaines-Cooper

27th Aug 2010
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As the Seychelles-based entrepreneur prepares to continue his long-running residence case against HMRC at the Supreme Court, Gina Dyer speaks to the man himself to get the inside story.

Although he’s set up a variety of successful businesses in 16 countries, Robert Gaines-Cooper is probably best known for his epic battle against HMRC over the issue of his tax residence status.

In February the Court of Appeal ruled that HMRC did use the correct interpretation of the UK’s non-resident policy, IR20, in Gaines-Cooper’s case. This means he could now be liable for taxes dating back to 1993 – the total of which could reach an estimated £30m.

Gaines-Cooper had appealed on the basis that he moved to Seychelles in 1976, but it was ruled that he never qualified for exemption from British taxes as a non-resident since he had not ‘cut ties’ with the UK; a term which HMRC said was implied in IR20.

One of the key areas of dispute was the fact that Gaines-Cooper maintained an estate in Oxford, where his wife and child resided – meaning he had not fully ‘cut ties’ with the UK, according to HMRC’s definition.

However, Gaines-Cooper insists that he did, in fact, meet the conditions laid out in IR20 as he spent less than 90 days per year in the UK and made Seychelles his permanent residence.

“The case itself was not about whether in fact or in law Gaines-Cooper is or was UK resident, ordinarily resident, or domiciled - it actually concerns whether HMRC (or, at the time, the Inland Revenue) had painted itself into a corner with assurances given in leaflet IR20 and whether it had changed its stance on matters of residence without telling anyone,” wrote AccountingWEB contributor and former tax inspector Simon Sweetman in February – a sentiment Gaines-Cooper was keen to echo this week as he prepared for the next stage of his case.

“I had very good advisers who read the legislation and arranged my affairs to ensure that I abided by them. The advisers gave their best advice on their understanding of the law as it stood at the time, but they have been prevented from doing their job effectively by these ‘implied terms’, which are wholly subjective to the people doing the implication.

“The people representing the government as interpreters of tax law must be able to tell people what to do. The terms shouldn’t be implied, they should be explicit,” insisted Gaines-Cooper.

Despite this, HMRC maintained its interpretation has not changed. An HMRC spokesperson told us in February: “HMRC’s interpretation of its guidance on residency in booklet IR20 was correct and the Court has agreed with HMRC that there has been no unannounced change of that interpretation”.

An adviser for Gaines-Cooper branded HMRC’s stance as “Stalinist” in its nature. “We believe everyone has a right to plan their financial affairs on the law that exists at the time and take advice. To come back decades later having revisited the’ implied terms’ and backdate the bill is shambolic”.

Another point Gaines-Cooper is keen to dispute is the distinction (or lack thereof) between tax avoidance and tax evasion. “One thing that upsets me is the hijacking of the word ‘avoid’. One should try to avoid taxes, not evade them. In the 2005, the government’s chief tax inspector said that from now on he would regard avoidance and evasion as the same thing – but of course they’re not. If a bus is coming down the road straight at you, you try and avoid it. Avoidance of taxes is the right thing to do (as long as it’s legal); evasion is illegal”.

In a recent interview with the Financial Times, Gaines-Cooper said: “It is easier and clearer to deal with the Seychelles government, it is no longer a banana republic. The UK is behaving like a banana republic”. This is a point he’s keen to replay as he enters the next stage of his battle.

“There are two things that drive entrepreneurs out of this country: one is excessive taxation (which is what drove me out in the 1970s), and the other is that the tax system is complex to the point where business owners don’t know where they stand”.

With the establishment of the new Office of Tax Simplification marking a shift towards clarity and consistency in future tax reforms, what did Gaines-Cooper have to add to the ideas pot for future tax policy makers? “Whatever is introduced should be done with the aim of making the UK attractive to business investment, so instead of being 19th or 20th in the list of countries that organisations most want to do business in, it climbs back into the top ten. The UK has sunk and the country will continue to sink unless something’s done about it”.

Gaines-Cooper has yet to be given a date for his Supreme Court appearance.

Replies (10)

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By frustratedwithhmrc
27th Aug 2010 10:59

I have some sympathy with Mr. Gaines-Cooper

Indeed if you return to HMRC's stance right at the very beginning of the whole affair, it was that IR20 was purely for guidance only and could not be relied on by taxpayers as a defence against an investigation by the Inland Revenue (as was). Fortunately for former UK taxpayers everywhere the judge dismissed this utter nonsense from HMRC, but it just shows how 'Stalinist' Inland Revenue and now HMRC will try to be if they can get away with it.

In other aspects of this case, Mr Gaines-Cooper does seem to have played to the letter of IR20 rather than the spirit of it. He has maintained some elements of his personal life in the UK by retaining a property here which is used to at least some extent by his family.

From a personal perspective (as someone who has been down the road of earning foreign income tax free whilst abroad), Mr Gaines-Cooper has provided a salutory lesson. If people don't like the taxes in the UK then they are free to go - however they must clearly demonstrate to HMRC that they have genuinely left the UK for permenently and for good reasons rather than just 'going through the motions'.

If this means that they need to remove themselves, their family, their investments, their property and all other ties to the UK (including membership of clubs and societies), then that seems fair enough.

HMRC seem to be pretty clear about it in their latest guidance notes (HMRC6) - Make a distinct break from the UK and we will consider you to be no longer resident for UK taxes. The more distinct a break that is made, the more likely it is that HMRC will accept that both the rules and spirit of the regulations is being obeyed.

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By GaryMc
27th Aug 2010 11:34

Avoidance v Evasion

A partner that I used to work for at Deloitte used to say 'Evasion you get a sentence, avoidance you get a fee'

Oh how we laughed.  When I say 'we' I actually mean 'he'.

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By spurs1952
27th Aug 2010 16:54


 Go for it Gainsy.  Good on yer and hope you win.

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By North East Accountant
27th Aug 2010 17:24

Certainty is needed!

Surely its time for a statutory residence test where a taxpayer can know with certainty whether they are UK resident or not?

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By cymraeg_draig
27th Aug 2010 23:07

Why do the 3 words dummy, pram and taxman come to mind?

This is just another case of sloppy drafting of legislation followed by HMRC interpreting it as saying what they wished it said or think it should say rather than what it actually says.

I once had a tax inspector become quite irate and accuse me of "using a loophole", to which my response was "if your too idle or too stupid to close the door, don't be surprised when people walk through it".

There is no such offence as "tax avoidance".  Tax avoidance is what it says, avoiding paying tax by lawfully arraging your affairs to minimise your tax liability.

Tax evasion is exactly the same thing, except you use unlawful methods of arranging your affairs.

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By billgilcom
28th Aug 2010 00:34

Avoidance is legal

I suppose that if Gainsy loses this appeal we might then get another on negligence (and whether he was entitled to rely on his advisers AND HMRC's guidance in making his return so that he was not negligent)

Good that somebody has the brass to challenge changes of mind (and retrospective legislation)


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By cardinalcall
31st Aug 2010 16:18

What is the difference? The Thickness of a Prison Wall.

In the words of your former British Chancellor of the Exchequer Denis Healey, "The difference between tax avoidance and tax evasion is the thickness of a prison wall".


William Brighenti, Certified Public Accountant, Certified QuickBooks ProAdvisor

Accountants CPA Hartford, LLC

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By andrewcrompton
02nd Sep 2010 09:30

Separate Taxation?

I thought nowadays that individuals were taxed separately, so logically Mr Gaines-Cooper only needs to remove himself from the UK.  Why should the actions of his family, unconnected for tax purposes, be relevant?

Let's say I'm a French resident but I have a house and bank account in the UK which I and my family regularly use.  Does this make me UK tax resident for all of my worldwide earnings - clearly by having a bank account and property in the UK I could be deemed to have "ties".

It all seems very muddled - let's hope for some clarity.

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By frustratedwithhmrc
02nd Sep 2010 11:22

No Double Tax Treaty, therefore no real protection

The previous posters illustration about someone with French residence, but some level of ties to the UK is a good one. However, where it falls down is that someone who has moved from the UK to France would have the Double Tax Treaty (hereafter DTT) that exists between the two countries to resolve any dispute over taxation – specifically the so-called ‘tie breaker’ clause. This is a core feature of all DTT’s and deals with the situation where a taxpayer could be seen as subject to taxation in both countries. Typically a tie-breaker clause will allow that the country where a taxpayer has primary residence will be where the taxpayer pays their taxes. Someone who has their primary residence in France (while retaining some measure of presence in the UK) will be able to offset any UK taxes against their French tax bill.

Mr. Gaines-Cooper was unable to benefit from any such tie-breaker clause as there was no DTT in force between the Seychelles and the UK. Equally, from the Inland Revenues perspective “One of the key areas of dispute was the fact that Gaines-Cooper maintained an estate in Oxford, where his wife and child resided – meaning he had not fully ‘cut ties’ with the UK, according to HMRC’s definition.”

As my username suggests, I am no fan of HMRC bureaucracy, however HMRC has a duty to collect tax as required by parliamentary statue and is entitled to do so from Mr. Gaines-Cooper given the circumstances stated above.
Mr. Gaines-Cooper has claimed that the Inland Revenue are behaving unfairly in that “The case itself was not about whether in fact or in law Gaines-Cooper is or was UK resident, ordinarily resident, or domiciled - it actually concerns whether HMRC (or, at the time, the Inland Revenue) had painted itself into a corner with assurances given in leaflet IR20 and whether it had changed its stance on matters of residence without telling anyone,”

However, using the classic legal test, if the notional “Man on the Clapham Omnibus”* were asked whether someone who claimed the benefit of exemption from UK taxation on the grounds that they were resident in the Seychelles, but retained a substantial and furnished property which housed a part of his possessions and was at least periodically occupied by his family (wife and child certainly, Mr. Gaines-Cooper possibly?) then I suspect his answer would be “Well, doesn’t that mean he has at least some form of residence in the UK”.

I am not a lawyer, but I suspect that if Mr. Gaines-Cooper had left in his entirety, maintained no property or investments in the UK and did not visit for any substantial period, then he would not be in the headlines today. It is only because he has obeyed the letter and not the spirit of the original IR20 guidance that he is being chased for £30m today.

I have no drum to bang for HMRC; indeed I believe the organization is no longer fit for purpose and should be disbanded and replaced. However, given the circumstances they have some justification for pursuing Mr. Gaines-Cooper.



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By abelljms
03rd Sep 2010 07:51

is tax avoidance ok?



our industry thrives on advising clients how to arrange their tax affairs to minimize tax bills. 

But somehow this has crept to doing this at all costs using arcane niches of tax law to deliver excessively low tax bills to clients.

The recent discussions of Phillip Green of Arcadia/BHS reveal that he genuinely sees nothing wrong with the unbelievable amounts of tax he has shunted through his wifes residence in Monaco status. He even claims to pay £millions in uk tax by taking on to himself this week the tax bills of all his staff as part of his 'burden' - he has lost 'connect' with the real world - ask any non-professional if he is a tax avoider on a massive scale. And our own uk government continues to feed the voracious appetite these people have for puffing their egos IN THE UK. At the least they should be shunned unless they join the club. It's funny how those with the biggest tax bills are the most fascinated by avoiding tax even though they have bundles.

I do agree however that HMRC should not pursue Mr. GC going back many years. A pragmatic approach is to say to him "look mate you got away with it through a [***] in our tax laws which is now closed. Good luck to your sly advisors, but from now on you have to do xyz, or you are uk taxable from 90 days time. The old years are now closed"



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