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Court strikes down 90-day tax residency rule

by David Campbell on Feb 18, 2010 at 09:04

The traditional 90-rule on UK residency for tax purposes was overturned yesterday as an appeal court ruled that liability should be judged by long-term ties to the country.

Businessman Robert Gaines-Cooper was judged to have maintained the ‘centre of gravity of his life and interests’ in the UK, despite having spent less than 91 days in the country each year and based himself in the Seychelles.

The ruling will have widespread repercussions for the UK’s wealthy who have been considering an overseas base as the deadline for a 50% tax on high-earners nears.

The 90-day rule has led to a thriving commuter traffic between residencies such as Monaco and Switzerland (above) and London, and to millionaires such as the Barclay brothers living in self-imposed exile for much of the year.

Ronnie Ludwig, partner in the private wealth group at accountancy firm Saffery Champness, said: ‘The Court of Appeal judgment confirms how difficult it can be to shake off UK residency. 

‘Retention of ties to the UK can seriously jeopardise residency status and many individuals, including those who have already left and think they are no longer resident here, need to reassess their lifestyles and take professional advice.’

The revenue services are now said to be urgently liaising with wealth management businesses on how the new rules will be applied for those who work in the UK but base themselves overseas.

The treasury this week has also published draft rules on a tougher ‘residency test’ which will use a greater level of qualitative judgment to determine residency such as family ties and the extent of business interests when determining liability for tax.

Leading lawyers and tax advisers said that despite being an accepted convention, the 90 day rule had never had firm base in law, however.

Withers partner Christopher Groves said: ‘One of the great myths of tax planning is that spending less than 91 days (or nights) in the UK is sufficient for an individual not to be treated as resident here. 

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8 comments so far. Why not have your say?

Ian

Feb 18, 2010 at 10:16

Judgements like question the point of why do any long term financial planning at all.

If you change the accepted rules retrospectively, what is the point in any financial planning as any benefits you were entitled to could be wiped out at a whim.

It appears that we are now living in Prison Britain, with no escape as long as this grubby bunch of losers are in office.

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Phil Castle

Feb 18, 2010 at 11:04

is why you'd want to come back to Britain anymore. You can't Ski here (from Kent it's quicker to drive to France than Soctland), whilst you can scuba dive, it's much more pleasant in the med or Oz and if you want something that is like Margate and so speaks English then having been in Gibralter for a while, then Gib is English speaking, has good diving and is in an hours drive to Spanish mountains for Skiing.....

Another thing that confuses me is that since as we know student visas are issued with no record of when someone leaves a country, this rule only catches the honest person trying to legitamately reduce their tax and not the person who comes to the UK and does not tell. Correct me if I am wrong, the UK does not operate a clocking in and out system for UK passport holders, just as it doesn't for Foreign students who overstay their welcome....

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Richard

Feb 18, 2010 at 11:21

Typical HMRC

Scatter allarm and uncertainty, threaten retrospective approach, don't define the rules -

End result is

Discord, opaqueness, uncertainty so they can "interpret" the laws they haven't made as it suits them.

This causes delay in settling individual tax returns.

This is the way they harass the UK citizen with their approach to any tax efficient investments, making most of them unwilling to repeat the experience.

However - being pretty thick and one trick ponies, they have failed to realise that these non resident people will simply drop off and move abroad and they will lose any other taxes, revenue they might have received.

Well done Gordon Brown and his HMRC tax enforcers - another clean own goal!!

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Man in Black

Feb 18, 2010 at 12:37

Why do the Revenue not get it?

The result of this ruling will be an awful lot of work for tax consultants as people justly and rightly take steps to stop thieving Public Sector Types stealing their money to piss up the wall on Welfare, non-jobs et cetera.

It will not raise a single penny in revenue; indeed by confirming the UK's current ethos of high and confiscatory tax-rates, it will only encourage investors and wealth creators to look elsewhere.

At the other end of the social spectrum, its funny to see that the Revenue now chairs a "Hidden Economy Working Group" to "take a fresh look at what can be done to reduce the hidden economy" (what we used to call the 'black economy' before the term was considered too descriptive).

Perhaps the answer to the conundrum is the same at both ends: CUT TAXES. CUT SPENDING TO CUT TAXES. STOP STEALING OUR MONEY.

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Tory Central Office

Feb 18, 2010 at 14:35

Need I say more. Usual self-intersted nay-sayers with no regard for the genarl joe public.

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Gerry Cooper

Feb 18, 2010 at 14:51

Civil Service waste, profligate Government spending and Benefit fraud piss me off as much as anyone else, but - this is surely about something else.

There are a great many people, and not only UK citizens, whose income and wealth are derived principally from business and other assets based in the UK and who, by having the wealth to enable them to shuffle back and forth to whatever tax haven they choose, avoid paying their share (fair or otherwise) of tax towards the UK budget.

This means that (and think about it, all you moaners) that the rest of us, who actually want to be here, have to pay more to make up for those avoiding their share.

If the wealthy really want to avoid paying UK taxes, they should cut their ties to the UK completely, and frankly, I doubt we'd miss them, but to repeat, where wealth and assets are derived from and generated in, and in many cases suported by, the UK and it's indiginous population, why should they not contrbute their (fair or otherwise) share?

That is not to condone or support in any way the performance of the present Government, but the solution to that lies in the Ballot Box.

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Fazmac

Feb 21, 2010 at 11:17

When will the HMRC learn that every time they obtain a judgement such as this it just spurs us on to find new ways to slip and slide past the obstacles they put in our way. Clients already adopt tax avoidance strategies such as living offshore for a year whilst they incorporate everything to skirt pension and IHT restrictions. This will just put another layer of thought and motivation into the mix.

I would beg to suggest that in the "cold war of tax avoidance" the more ingenious private sector will always stay ahead in the arms race.

HMRC, keep chasing us boys, it'll be like trying to pick up mercury our hold onto an eel.

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Ian Thompson

Feb 23, 2011 at 13:45

This post is beginning to annoy me.

I left the UK 18 months ago due to lack of work in my chosen field (I'm a QA consultant to the Pharma / BioPharma industry). I was lucky enough to find a job working for and being paid by a Swiss company and paying Swiss tax. I have moved the whole family here and have 4 children (2 attending the local school) with me. Because I haven't sold my house in the UK (who can in the current housing market!!) does this mean I'm still liable for tax in the UK.

Just because we're in Switzerland doesn't mean we're all just her for convenience and tax avoidance reasons.....

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