Supreme Court Rules on 'Residence'
By a majority of 4 to 1 (Lord Mance dissenting) the Supreme Court dismissed appeals by (1) Davies and James and (2) Gaines-Cooper against earlier decisions of the Court of Appeal. The ruling puts into question the tax status of expatriates. It can no longer be assumed that non-resident status can be established by owning property abroad and spending no more than 91 days each year in the UK. A wider test applies based on connections with the UK and whether there has been a ‘distinct break in the pattern of the taxpayer’s life in the UK’. This case has implications for many tax exiles – including rock stars and sportsmen – who have relied on guidance in IR20 and on the ’91 day rule’ to establish non-residence and avoid UK tax.
The government announced, in the 2011 Budget, that it intends to introduce a Statutory Residence test to bring some clarity to the issue. An HM Treasury consultation has just closed.
The full Supreme Court decision, handed down on 19th October, is here :http://www.bailii.org/uk/cases/UKSC/2011/47.html
[ Lord Wilson reminds us that income tax was introduced by an Act of 1799 (39 Geo III, c 13) in order “to raise an ample Contribution for the Prosecution of the War” against Napoleon. Do we still see the French as a real threat or can we now safely discontinue the practice of taxing incomes ? ]