We all know that the chancellor needs to raise more money and it is no secret
that he is suspicious of those who seek to use the rules on residence and
domicile to their advantage. That is why the Treasury issued a consultative
document on the subject as part of the 2003 Budget.
What I find wholly unacceptable is when the Treasury/HM Revenue &
Customs attempt to move the goal posts without prior notice. We had one example
of this with the Arctic Systems case and another with the changes in this year’s
Finance Act on the tax treatment of trusts.
With the special commissioners’ decision on Gaines-Cooper versus HMRC we have
yet another attempt to change the rules by stealth. Robert Gaines-Cooper is an
international business man spending much of his time overseas. His family are
based in the UK, however, and not surprisingly he is a frequent visitor. He
organised his affairs to be in the UK less than 91 days each tax year on
average, thereby retaining a non resident status.
The special commissioners decided that this was not the correct test to apply
and that it should be based on the number of nights in the UK. They have the
authority to make decisions of this nature and I have no difficulty with them
interpreting the law as they see fit. What I find unacceptable, however, is that
it was Revenue Counsel who put forward the proposal that this was the correct
test to apply.
This was presumably with the full authority of HMRC, despite the fact that it
was in direct contradiction to their own stated guidance. Taxpayers have a right
to be treated fairly.
IR20 is issued by HMRC as guidance to taxpayers and their advisers based on
their interpretation of the law. To date, statements made by HMRC have been
accepted in good faith by taxpayers. It now seems that they are happy to discard
their own guidance when it no longer suits their purpose.
The advice must now be to play safe in calculating the days spent in the UK,
but the real issue is the extent to which future statements can be trusted. I
realise that IR20 refers to the ‘normal rule’, but there is nothing particularly
unusual about the Gaines-Cooper case that would cause the stated practice to be
set aside. We need a clear statement from the Treasury of its policy on
statements of practice so that trust can be re-established.
Mike Warburton is senior tax partner at Grant
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