Would Gaines-Cooper fail the new residency test?

THE LONG-RUNNING case involving Robert Gaines-Cooper will finally come to an end in the next couple of months. The Supreme Court will present its findings on whether or not Gaines-Cooper was resident through the period 1993-94 to 2003-04, with a £30m estimated tax take at stake.

This comes at an apt time. The government is currently consulting on its statutory residency test, which was in no small part a result of the Gaines-Cooper saga. It has been met with praise, despite its complicated nature, and will hopefully prevent further situations such as Gaines-Cooper from arising. With this in mind, Accountancy Age has applied the test to Gaines-Cooper himself and come up with some interesting conclusions.

The facts about his lifestyle were all covered in his 2006 appeal hearing to the HMRC special commissioners. A subsequent appeal to the Court of Appeal did not challenge the facts, only the processes and the application of IR20, which covered residency, to be replaced by the current HMRC6.

One point that did arise from the Court of Appeal hearing was the judges’ support for the special commissioners’ method in counting days spent in the UK, which effectively measured nights spent in the UK that were not solely in transit. This is the same method applied in the statutory residency test (SRT) consultation, meaning that we can use the special commissioners’ figures.

These are not necessarily an accurate measure, though: the time period was long and, as the commissioners pointed out, Gaines-Cooper had provided the figures to the best of his ability. It was interesting to note that HM Revenue & Customs’ day counting had him spending more than 200 days a year in the UK during the first few years of the period in question because it calculated that, where no records were available, the time was presumed to be spent in the UK. It is not clear if this will be the case in the SRT consultation, though taxpayers would be well advised to keep records.

We have to presume that, were an SRT in place during this period, Gaines-Cooper would have kept meticulous records with so much money at stake and no doubt advisors employed. In this case, we will use the special commissioners’ figures on time spent by Gaines-Cooper in the UK:

Gaines Cooper days spent in the UK 1991-2005

The first thing to say is that, under the SRT, Gaines-Cooper would not be conclusively resident, or non-resident, on days alone. Under the proposed rules, more than 183 days spent in the UK would automatically qualify him as resident. Considering this was stipulated in IR20 at the time, it is not surprising that he spent less time than that throughout the period.

As for being conclusively non-resident, the test has slightly more complicated rules. The proposals distinguish “arrivers” to the UK and “leavers”. Arrivers are individuals who have been non-UK resident in all of the past three years whereas everyone else counts as a leaver. In an attempt to encourage high net worth overseas nationals to the UK, arrivers have a slightly easier time in proving themselves non-resident. For a start, they are conclusively non-resident if they spend fewer than 45 days in the UK, as opposed to 10 days for leavers.

Unfortunately for the hypothetical Gaines-Cooper, he was resident in at least one of the three years leading up to 2001-02, meaning that he could not be treated as an arriver in the year he spent only 27 days in the UK. Indeed, there are no three consecutive years in which Gaines-Cooper was non-resident, either as an arriver or as a leaver. In this case, he is treated as a leaver in each year under scrutiny.

Other elements that would make him either conclusively non-resident or conclusively resident – parts A and B in the test – do not apply to Gaines-Cooper. In 2001-02 and 2003-04, he spent fewer than 90 days in the UK, meaning he could theoretically qualify as non-resident by working full-time abroad. However, there is no indication that he worked an average of 35 hours a week abroad.

On an application for a gun license in the UK, Gaines-Cooper said in 2002 that his “only home” was in the UK. But in reality he had a home in the Seychelles, so he could not be considered conclusively resident.

In this case, he would fall under category C, where other factors are taken into account such as are family, accommodation, work in the UK, days spent in the UK compared with elsewhere, and time spent in the UK in the preceding years. The number of factors that apply depends on how long was spent in the UK in a given year.

Single factor

In six of the 11 years under scrutiny, Gaines-Cooper spent more than 120 days in the UK. Because of this, only one of the connecting factors needed to apply for him to be classed as a UK resident.

Straight away, we can discount his claims under the SRT in these years. The family factor states that, if an individual’s spouse is resident in the UK, that counts as a connecting factor. Robert’s wife, Jane Gaines-Cooper, was living in the UK throughout the period, at least until 2001. We know that the whole family, including their son James, moved to Switzerland in 2005 and there is no indication that Jane – who was Seychelles-born and applied for UK naturalisation – would not have been non-UK resident before this move.

In three of the six remaining years, Gaines-Cooper spent between 90 and 119 days in the UK, meaning that two connected factors would make him non-resident.

As well as family, Gaines-Cooper had accommodation in the UK in the form of Old Place in Henley – where Jane and later James lived – which he kept hold of throughout the period in question. Under the SRT, any “accessible” accommodation that can be used by them or their family as a place of residence counts as a connecting factor. Therefore, in these three years, he was resident.

So we still have 2001-02 and 2003-04. In 2003-04, he spent 71 days in the UK, meaning that three connecting factors would make him resident. In addition to home and family, we can add time spent in previous years; if the individual spent more than 90 days in the UK in either of the preceding two years, he is counted as resident. In 2002-03, he spent 105 days in the UK, making up the three factors and making him resident.

The one remaining year is 2001-02, when he spent only 27 days in the UK. The three factors already discussed applied to him in this year: family, accommodation and days spent in previous years. However, with Gaines-Cooper spending only 27 days in the UK this year, HMRC needs to show four connecting factors.

The two remaining factors left are: time spent in the UK compared with other single countries; and “substantive” work done in the UK. Because of the nature of the appeal, which focused on the period as a whole, we do not have the facts to know how much time he spent in other countries.

Split decision

The special commissioners concluded that he spent “more time in the UK than in the Seychelles”. Gaines-Cooper, though, said his time was split “three or four months in the UK” and “three or four months in the Seychelles”. In 2001-02, he spent substantially less time than this in the UK. We can presume only that much of the shortfall was made up in the Seychelles, where he was based, and therefore he spent more than 27 days in the country.

In that case, all we have left is “substantive UK working”. We know that, between 1992 and 1995, Gaines-Cooper “spent a lot of time” in the UK with his orthopaedic surgery business. By 2004 he was a director of a number of UK companies in the laryngeal mask business as well as two companies based in the UK. He also had an office at Cedar Court in the UK.

The substantive UK working factor requires 40 days of work to be completed, which in this case is impossible, considering he spent only 27 days in the UK. Therefore, in 2001-02, he was non-resident.

So what does all this tell us? Mike Warburton, tax director at Grant Thornton, makes the reasonable point that, were an SRT in place, Gaines-Cooper would have changed his behaviour accordingly.

Reviewing his situation, though, it might not be as straightforward as this. Removing the family and accommodation connecting factors would require a substantial change in lifestyle; perhaps Robert could have not married Jane, though the arrival of their son James would have meant the whole family moving out of the UK. Not out of the question but certainly not an easy change in behaviour.

The same is true with accommodation. A multimillionaire such as Gaines-Cooper would expect to have accommodation in a country where he has spent most of his life and his friends and family are based. To remove this connecting factor, he would have to sell his house and reside with relatives or in hotels when he is in the UK. Again, not easily achieved.

These two connecting factors would be enough to make him resident unless he substantially cut down on the numbers of days spent in the UK. It seems as though spending less than 90 days a year in the UK could be enough for him in most cases – this would also remove the connecting factor of days spent in previous years. But, again, in eight of the 11 years, this would necessitate a dramatic change in behaviour; at very best spending two weeks less in the UK a year, where his family is based but, in most cases, spending two months fewer here.


Much has been made of the special commissioners’ citing of Gaines-Cooper’s trips to Royal Ascot, his pheasant shooting in the UK and memberships of a Rolls Royce enthusiasts group and Mensa. With the SRT, the Treasury has managed to make these factors an issue without the ambiguity. Sure, individuals can continue to go to Ascot and go pheasant shooting but they will likely need a place to stay and this is factored in.

Another interesting strand is that Gaines-Cooper himself used these ambiguous factors about his residence. A vital part of his defence – admittedly also on the point of domicile – was that he was settled in the Seychelles and this was his home. He called upon the bishop, the president, the high commissioner and charity heads in the Seychelles to support this point. But under the SRT, this is all an irrelevance. However much an individual sets themselves up in a different country, substantial links to the UK are the only issues that count. The proposals explicitly state that it is more difficult to lose UK residency than gain it.

There are still ambiguous features. For example, does “only home” constitute a place to reside or ownership of a home? The fear that wealthy individuals can play the system by only slightly modifying their behaviour seems to be allayed, though, which will be reassuring to the Taxman, if not Gaines-Cooper.

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