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Tax residency test for non doms? About time!

18th Feb 2010
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What does the result of the Gaines-Cooper ruling mean for ordinary people? Simon Sweetman assesses the impact on tax law.

This week it was announced that the Court of Appeal had rejected a case brought by British born entrepreneur Robert Gaines-Cooper regarding his tax residency status.

In this case the lay press has rightly pinpointed that something significant has happened in the Court of Appeal – although none of them seem quite sure what it is. This is a complicated story, because Gaines-Cooper originally argued that:

  • He was not resident in the UK
  • He was not ordinarily resident
  • He was not domiciled in the UK

In 2006 the Special Commissioners ruled against him on all three issues. In October 2007 he went to the High Court to appeal on the question of domicile and the Court found against him (the grounds of the unsuccessful appeal was that the Special Commissioners had erred in law by misstating the facts).

Bizarrely, there is a website devoted to showing how very Seychellois Gaines-Cooper is. As of today, it has not caught up with the Court of Appeal decision, because what we now have is a decision by the Court of Appeal on an application by Gaines-Cooper for judicial review of HMRC’s decision that he was UK resident (on the grounds that their decision ignored the ‘90-day’ rule which they set out in the IR20 booklet) - and the court has refused such a review.

The essential facts appear to be that Gaines-Cooper continued to maintain a substantial residence in the UK and that his family certainly lived there, together with his collections of paintings, classic cars and guns (which the press seemed to find more significant than his family). Although the maintenance of a property available to live in ceased to be part of the statute law on residence some time ago, it remains a criterion, and that seems to be reinforced by this decision.

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.

For most of its length, the case is not concerned with Gaines-Cooper at all, but with Messrs Davies and James, who are waiting to go to tribunal on the question of their ordinary residence, but contended that because of the guidance given by the Revenue it had no right to force them to appeal. The decision was that in fact IR20 did not offer them the comfort that they argued it did, and so their applications could not succeed. Gaines-Cooper’s position was weaker, because he already had a finding of fact against him.

Gaines-Cooper’s lifestyle may not be relevant to most of us, and the real question is what this means for more ordinary people who may be unclear about their residence position. What this does emphasise is that the painting-by-numbers approach to questions of residence is not necessarily going to give you the right answer, and that you need to read HMRC’s guidance (now in booklet HMRC6) as just that - it is not something that you can use to construct elaborate and foolproof formulae.

HMRC has offered a comment on the case, which you can read by clicking here.

The minutes of HMRC’s Joint Expatriates Forum from January (published on the HMRC website) may offer some further help. At that point HMRC said that it requires to be satisfied that an individual has left (they have become not resident) for a genuine full time employment abroad and when that occurred, if so they will not seek to look at the question of retained UK accommodation as part of the considerations.

I think it’s fair to say that the world is no different today from what it was last week. What seems to be clear is that HMRC will take a different view if you leave the country for employment abroad (and probably for self-employment) than if you claim to have left but try to rely on counting the days. However, there are still an awful lot of knobbly bits in real life that do not easily fit the examples provided.

Incidentally, the Guardian suggests today that the Treasury has been talking to “top accountants” about the introduction of a statutory test for residence. About time too, one might think.


Replies (3)

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Mark Lee headshot 2023
By Mark Lee
18th Feb 2010 18:41

The Court of Appeal ruled on Gaines-Cooper in October 2008

As you rightly point out Simon, last week was not the real decision in this case. It was 'simply' a Judicial review of HMRC's application of the rules in IR20. Mr Gaines-Cooper had already had his residence status determined by the Court of Appeal in 2008.  Not that the mainstream media seems to be aware of the distinction.



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By User deleted
22nd Feb 2010 13:28

Gaines - Cooper
If he (or others) are now deemed to be resident in the UK, does this create an IHT problem? Residency in 17 of the last 20 tax years deems you domiciled for IHT purposes, so could those who now come back into the UK Income Tax residency net find themselves back in the IHT net on their worldwide estates?
And what of the offshore tax measures which may have been
taken whilst they believed they were non-resident and non-domiciled which could have been taxable if undertaken by a UK resident, and which, presumably, now may be taxable?
Clarification is urgently required.
David Kibel

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By yogayogi
22nd Feb 2010 14:07


In my opinion, Gaines-Cooper is a bloody nuisance!  His undoubtable "gaming" of the residency system will/has caused tightening of HMRS's rules in a way likely to disadvantage many GENUINE ex-pats: he gives us all a bad name.

HMRC "concessions" and "guidelines" are merely that.  If someone is evidently and arrogantly abusing them it is reasonable and correct HMRC disallow concessions and work beyond guidelines.  We (should) all know sound practice to demonstrate "centre of interests": people who arrogantly choose to think they are above such things deserve to get hammered - and the sooner the better.

In my opinion it's also a pity Rothermere apparently remains "above the law" (allegedly due to political support)

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