Seychelles rule throws tax advisers

The glorious Seychelles weather enjoyed by Robert Gaines-Cooper will feel a
little more chilly after his loss in the courts. Gaines-Cooper was battling to
be treated as domiciled and resident on the island.

While the judgment itself was worded amusingly, referring to Gaines-Cooper’s
affection for Berkshire and Oxfordshire as pulling ‘upon his affections and
interests all his days’, the decision has left tax advisers at odds over the
treatment of HM Revenue & Customs guidance going forward.

HMRC guidance states that if you spend less than 91 days in the UK then you
can apply for non-resident status. However the courts accounted for his travel
either side of his full days spent in the UK, a situation that has seen advisers
fume that HMRC used this argument to win the case.

Advisers says this goes against HMRC’s own expressed view.

Grant Thornton senior tax partner Mike Warburton says the situation is
‘unacceptable’, and the taxman was happy to discard its own guidance to suit its
own purpose.

‘Could it have a retrospective effect?’ Warburton adds.

It probably could, given the Gaines-Cooper case considered historic issues.

Anne Redston, chair of personal taxes at the CIoT, agrees that it will be
difficult to know when to rely on HMRC guidance and when not.

‘Everything is up in the air,’ says Redston.

While the case is expected to go to appeal, Redston believes that HMRC’s
tactic could suggest a disturbing trend to be employed in other cases.

Others are less sure, taking a more complicated view of the case itself.

Some say that Gaines-Cooper had pushed beyond the boundaries of credibility
in the amount of time he spent in the UK in any case, meaning the case could be
something of a one-off.

Stephen Coleclough, PricewaterhouseCoopers partner and chairman of the CIoT’s
technical committee, said: ‘I’m not personally concerned about this, as the
90-day rule was established as a concession. Gaines-Cooper was taking advantage
of a concession and essentially spent 270 days in the UK but claimed he had
spent just 90.’

He believes many individuals are pushing the limit as far as the 90 day rule
is concerned. The decision also looks like common sense in an age where one can
live in a tax haven and reach London on a Monday and go home on a Wednesday
quickly. Treating a day as a ‘travelling’ day meant something in the age of
steamships, and not now.

Advisers say it will be hard for HMRC to open up closed tax returns, and only
those under ongoing investigation could be at risk of finding their time spent
in the UK scrutinised. Non-residents will have to keep good records of journeys
to the UK in the future.