Fabio Massimo Genovese v Her Majesty's Revenue & Customs, SPC 00741

Spc00741

Income tax – whether individual employed in and resident in UK for over three years was ordinarily resident in relevant year of assessment – on facts, yes – appeal dismissed

FABIO MASSIMO GENOVESE Appellant

- and -

Special Commissioner: JOHN CLARK

Sitting in public in London on 17 November 2008

The Appellant in person

Akash Newbatt of Counsel, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1. The issue in this case is whether Mr Genovese was ordinarily resident in the UK in the year of assessment 2001-02.

2. A substantial part of the evidence was provided by means of a Statement of Agreed Facts, reproduced below. In addition to a bundle of documentary evidence, Mr Genovese provided a witness statement and gave oral evidence, as did Mrs Marina Genovese Fasoli.

1. Mr Genovese is an Italian national and was born in Venice, Italy.

2. He is an investment banker. In the relevant period he was specialising in mergers and acquisitions in relation to Italian and Swiss Financial Institutions.

3. He joined JP Morgan in Milan in 1987 and, apart from a few months training in New York, continued working for the bank in Rome until 1990.

4. In 1990 Mr Genovese was assigned by JP Morgan to work in London on expatriate terms. He continued to work for JP Morgan in London until he was made redundant in 1995. Following his redundancy Mr Genovese remained in London to find another job.

5. In May 1995 Mr Genovese was offered a job with UBS and took up duties in Switzerland in August. His focus was on the Italian Financial Services market.

6. On 2 December 1995 Mr Genovese married his wife. His first son was born in Zurich in 1997.

7. In 1997 UBS merged with SBC.

8. In March 1998 Mr Genovese sought and was offered employment by Salomon Brothers. This role would be in their London office. He did not accept the offer.

9. In April or May 1998, following a post merger reorganisation, UBS offered Mr Genovese the opportunity to move to its Milan or London office. Mr Genovese chose to move to UBS’ London office where he was engaged on expatriate terms and conditions. He continued to work on Italian Financial Services clients, and later expanded to Swiss, Austrian and on some German Financial Institutions.

10. On arrival in the UK in 1998 Mr Genovese rented accommodation in London. His family moved to London and they shipped their furniture to London.

11. In 1999 Mr Genovese’s terms of employment were changed from expatriate terms and conditions to employment under a local UK contract of employment.

12. Mr Genovese’s second son was born in London at the end of 1999.

13. In or around 2000 Mr Genovese put his children down for a private preparatory school.

14. In the autumn of 2001 the lease on their flat expired. Mr Genovese renewed it on a one year lease with a three month notice period. Mr and Mrs Genovese then decided to invest in the UK property market and they identified a suitable family home in London. In March 2002 they arranged a mortgage and made a formal offer of £1.8 million to purchase [property address]. The purchase was completed at the end of July 2002.

15. In May 2002 Mr Genovese was asked to take a role as Office Manager in UBS’ Milan office. He accepted the role on a temporary basis and commuted to Milan from Monday to Friday each week. In September 2002 Mr Genovese returned to work full time in the London office.

16. Mr Genovese continues to live and work in London.

17. Mr Genovese has been resident in the UK since 1988-99 and ordinarily resident since, at least, 2002-03.

1. In addition to the agreed facts, I find the following facts from the other evidence given.

2. The letter of secondment from UBS dated 20 May 1998 stated that it would last until 31 December 1998, after which Mr Genovese would be transferred to a local contract in the UK. A subsequent letter dated 18 December 1998 from Warburg Dillon Read (the Investment Banking Division of UBS AG) extended the existing terms of his contract until 30 June 1999. The local contract letter from Warburg Dillon Read (of which there was only an extract in the bundle of documents) did not specify any duration, and referred to the continuity of his employment with UBS since 1 August 1995.

3. In an undated form P86 sent to HMRC by Ernst & Young on 25 November 1998, Mr Genovese specified his date of arrival in the UK as 1 July 1998 and stated that he intended to stay in the UK for “2-3 years”. In his witness statement he indicated that at the time he had had no clear idea how long he would remain in the UK, and had selected this response from the examples given in the form despite being aware that this would deprive him of the opportunity to claim temporary workplace relief. He had felt that he could not honestly say that he expected to leave the UK within two years.

4. In September 1998 Mr Genovese took a one-year tenancy of a flat in London. In August 1999, the landlady sold her interest in the flat to a company. Mr Genovese agreed a further one-year tenancy with the new landlord in September 1999, and a further similar term in September 2000. In September 2001, he signed a new tenancy agreement, again for a one-year period. This agreement contained an option to renew for a further year, but with a provision permitting early termination by the tenant during that year on giving three months’ written notice.

5. From 1998 onwards Mr Genovese continued to specialise in Italian markets. However, given the continuing uncertainty in the merchant bank employment market, he felt that there was a strong case for remaining around the head office in London. He commented that this was where personnel decisions continued to be made and personal relationships with decision makers were important. He viewed his immediate employment prospects on a quarterly basis, and contemplated moving offshore to obtain more secure employment.

6. In 2001-02 his two financial priorities were to retain his employment in what he described as a lucrative but volatile and competitive profession, and to find suitable accommodation for his growing family, bearing in mind that average house prices in the UK had increased by nearly 50% since his arrival in London. Mr and Mrs Genovese found a suitable property in March 2002; they both felt comfortable in it, and regarded it as a sound investment in place of continuing to pay ever increasing rent.

7. The role in the Milan office was primarily an office administration role with reduced client contact. Mr Genovese was reluctant to give up the client-facing role which he believed used his skills to their best effect. He and Mrs Genovese discussed the position, and it became increasingly clear that she was reluctant to move back with the family to her home city of Milan, which she did not consider to be a very pleasant place to bring up small children. Mr Genovese was also concerned that he would lose ties with clients and contacts in various European countries if he was based in Milan. He therefore decided in May or June 2002 to stay in London for the time being, continuing to commute between London and Milan.

8. No suitable position emerged at UBS, and Mr Genovese and UBS parted company by mutual agreement early in 2005.

9. Although Mr and Mrs Genovese and their children have continued to live in London, they still do not regard it as their permanent home.

12. The point at issue was...