Taxman wins again in residence attack

HMRC has won a case against music agent Lee Barrett, who was appealing
against an assessment for tax on a £2.8m payment he had received for his
management of the music star Sade.

The Barrett Case follows earlier landmark decisions on residence in the
Shepherd and Gaines-Cooper cases, where the interpretation of residence was
defined far more strictly and the 90-day rule was restricted, and reveals a
tougher approach on behalf of the taxman, advisers said, as the number of cases

‘HMRC has become far tougher on tax residence and it has come to the point
where we need a statutory test for residence,’ said Grant Thornton tax partner
Mike Warburton.

‘IR20 [HMRC’s guidance on residence] used to give you a good idea of where
you stood, but now it has become awfully difficult to decide when you cease to
become resident because of the interpretation of case law.’

Barrett, who was born in Canada but grew up in the UK, had argued that he was
out of the UK during the period when he received the payment, and so not a tax
resident at the time.

But special commissioner Adrian Shipwright ruled that the tax was payable, as
Barrett could not show that he had made a ‘distinct break’ in his pattern of
life. He still held an employment contract with his company Centurion Management
and the payment was made when Barrett was a tax resident in the UK.

The government has also made tax residence and non-domiciled status a
legislative priority.

In the pre-Budget report, chancellor Alistair Darling outlined legislation
requiring non-domiciles to pay a £30,000 levy and said he would introduce rules
‘preventing people claiming they are out of the country when they are actually

Accountancy Age readers this week delivered their own verdict on the
non-domicile row between the major political parties, saying they were
ambivalent about non-domicile numbers.

Asked in an online poll on
whether they thought non-doms could afford to pay the £25,000 levy proposed by
the Tories, 31% of the respondents said the debate about numbers of non-doms was
not worth having.

Related reading