THE SUPREME COURT has found in favour of HMRC in the long-running saga over Robert Gaines-Cooper’s tax residency status.
This morning it upheld the Court of Appeal’s decision that Gaines-Cooper was a resident of the UK despite spending most of his time in the Seychelles.
The dispute centred around IR20, which was the authority’s guidance on what constitutes residency for tax purposes.
Although Gaines-Cooper claims to have followed the guidance, HMRC and a number of court rulings found he retained strong links to the UK, which meant he was resident.
The decision announced today was on a 4-1 split. The majority of Lord Justices found that even under a full reading of IR20, Gaines-Cooper was not resident. Paragraphs 2.1, 2.7, 2.8 and 2.9 of the document indicated that a claim for non-residency would generate a “multifactorial consideration” of an individual’s circumstances, the judges found.
There was “insufficient evidence” that HMRC had departed from IR20 as a matter of settled practice, they added. The appelant’s evidence that HMRC had done so was “far too thin and equivocal”, they said.
The judges said that HMRC’s position on how to achieve non-residency “should have been much clearer”.
Lord Mance, who dissented, said it would be “remarkable” if there were a requirement for a distinct break when no such requirement was clearly expressed.
The case has been cited by commentators as one of the catalysts for the statutory residency test, on which the government has just finished consulting.
In a statement, Gaines Cooper said: “The judgement I have received today is a disappointment to me and to my family.
“I also consider it to be a blow for all UK taxpayers who have relied on HMRC’s published guidance when planning their tax affairs.
My next step is to seek the views of my legal advisers with a view to referring my case to the European Court.”
Richard Teather, senior lecturer in tax law at Bournemouth University, said:
“In this case, HMRC has argued that it is not bound by its own published guidance and has sought to change long-established practice retrospectively. This result is bad news for taxpayers and for the wider UK economy because such an approach destroys trust in HMRC as it will drive wealth creators away from the country and result in less tax being gathered rather than more.”
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