The Supreme Court has given its decision in the long running Gaines-Cooper case, which involved a dispute over whether the taxpayer was resident in the UK for particular tax years.
The question to be decided was whether the Inland Revenue booklet IR20 ‘Residents and Non-Residents – Liability to Tax in the United Kingdom’ (withdrawn in 2009) had given rise to a legitimate expectation that an individual would be treated as non-resident if he had lived abroad for at least three years and his visits to the UK totalled less than six months in any one year, and less than 91 days on average.
The court held, by a majority of four to one, that the paragraph in IR20 that set out this rule was not a ‘free-standing’ route to non-residence. In its context it was merely part of guidance that, as a whole, informed the taxpayer that he must have left the UK ‘permanently or indefinitely’ in order to achieve non-residence, and that whether this was so must be determined by considering a wide range of factors in addition to ‘day counting’.
The case is of immediate relevance only to taxpayers who are in dispute with HMRC for periods up to 2009. For others it provides no clarity, except to confirm that residence must be determined by taking a balanced view of a range of factors. In practice this can mean that under the current rules obtaining certainty on residence status can be very difficult in all but the most straightforward cases.
In June 2011 the Government issued a consultation paper setting out proposals for a statutory test designed to remove this uncertainty, which would take effect from 6 April 2012.
For our factsheet on this case click here.
View the Moore Stephens' summary of the June 2011 consultation paper
View the Moore Stephens' representations in response to the consultation paper