UK Residency – Robert Gaines-Cooper V The Commissioners for HM Revenue and CustomsSunday, November 6th, 2011
Whilst this ruling from the Supreme Court is primarily concerned with the international issue of residency in the UK for tax purposes, the case also has implications for the wider payroll function.
This was a long-running case, however, briefly, in the 1970s; Mr Gaines-Cooper moved to the Seychelles and claimed that he had acquired a domicile of choice for the tax years 1992/93 to 2003/04. Mr Gaines-Cooper retained links with the United Kingdom, including owning a house, occupied by his wife and family, sending his son to a public school in England and attending regular social functions such as Royal Ascot. However, as he had spent less than 91 days in the UK in the above tax years, according to HMRC’s IR20, he had lost his residency status and should not be liable for UK tax.
The Commissioners for HMRC did not agree, contesting that he had not given up his domicile of origin (England) ‘permanently or indefinitely’, as the UK was still ‘the centre of gravity for his life and interests’. Therefore, the simple counting of days outside the UK was irrelevant.
The Supreme Court ruled by 4 – 1 against Mr Gaines-Cooper’s claim for non-UK residency in the tax years.
What are the some of the lessons learned and possible implications?
- This case concerned Mr Gaines-Cooper’s interpretation of HMRC guidance in the IR20. However, the Supreme Court ruled that this guidance was not binding, and the wider picture had to be looked at in determining residency
- Therefore, HMRC guidance has to be viewed as just that – it is their interpretation of legislation and should not be regarded as actually being the legislation
- This case has further highlighted that ‘residence’ has not been defined in legislation (which is why the IR20 may have been relied on). In the 2011 Budget, the Government announced that it would introduce a statutory definition of tax residence, which led to a consultation. We are expecting this to be included in The Finance Bill 2012 which will introduce the Statutory Residency Test from April 2012
- Supreme Court Judgement Gaines-Cooper, October 2011