Glyn
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 November 2013 |
| Neutral Citation | [2013] UKFTT 645 (TC) |
| Date | 08 November 2013 |
| Court | First Tier Tribunal (Tax Chamber) |
[2013] UKFTT 645 (TC)
Judge Howard M. Nowlan, Harvey Adams.
Patrick Way QC and Emma Chamberlain, counsel, appeared on behalf of the Appellant
Akash Nawbatt and Sebastian Purnell, counsel, appeared on behalf of the Respondents
Income tax - whether the appellant was non-UK resident in the tax year 2005-06 - retention of the appellant's established home in the UK to which the appellant returned on a number of occasions (often then having traditional Jewish "Friday night dinners" with his and his wife's son and daughter) - whether the appellant had established a "definite break" at the point of his contended acquisition of non-UK residence - whether the appellant's retained UK house remained a habitual abode for a settled purpose - appeal allowed.
The taxpayer's appeal against an income tax assessment for tax year 2005-06, in which year he had received a dividend of 22m in respect of shares in a UK company, succeeded. The taxpayer was resident in Monaco in that tax year, and not resident in the UK.
The appellant taxpayer ("A") was a British citizen and passport holder, aged 56 at the beginning of 2005. A was married, with two children of 29 and 24 at that time, neither of whom lived at home. A and his wife ("S") had owned their current house in North London since 1993, and the house was close to A's mother, their children, and their circle of friends.
A had jointly owned since 1989, with his brother (having bought out other family members), a property investment group ("M Group"), worth some 60m by 2005. A's expertise and role was on the management and administration side, whilst his brother dealt with acquisitions and disposals, and investment strategy. There was also one significant joint investment (with A's brother) outside the M Group.
By 2005, A wished to retire (having grown tired of his involvement in the business) and had agreed with his brother that it was preferable to try and split the business assets and for the two families to invest separately. A had also decided he should emigrate (for the indefinite future at least): avoiding tax on the anticipated dividend representing his "share" of the business was a significant influence on this decision. That dividend was to be satisfied out of the proceeds of asset disposals, and the M Group embarked on a programme of sales (although some properties were transferred into a new family vehicle predominantly for the benefit of the respective children of A and his brother).
A and S acquired an apartment in Monaco and on 5 April 2005 A departed the UK. S followed soon after. Two years later they found and moved into a more attractive apartment in Monaco.
During a five-year period in Monaco, A spent at least 200 days there each year. There were numerous foreign holidays. A made 22 visits to the UK in tax year 2005-06, invariably spending two full days in the UK and staying at the London house - visits usually comprised more than one purpose, but included celebrating family birthdays, traditional Jewish festivals, and, on 15 Fridays, the traditional Friday night dinner with children; A and S also saw (though substantially less than previously) their wide circle of friends. A total of 65 days (counting a time-based element of "travel days" into and out of the UK) were spent in the UK during tax year 2005-06, and roughly the same in the four subsequent years.
HMRC's basis for assessing A to tax in 2005-06 was that the London house remained a habitual abode; and there was no "distinct break", A had continued to participate in the business, and there had been no substantial loosening of family and social ties.
The tribunal's consideration of the case law test of "residence" picked out in particular the following:
(2) The question of whether the taxpayer has a "settled or usual abode" is of central relevance;
(3) It is very relevant to consider whether the taxpayer has a home outside the UK, and whether any such home is the dominant home (contrary to what was suggested by the Special Commissioner in Shepherd v R & C CommrsSCD(2005) Sp C 484);
(4) Thus, in weighing up the significance of all the factors, important here to consider whether A had a genuine home in Monaco, that much of his way of life revolved around life in Monaco, and whether A had purposes broader and more genuine for being in Monaco than simply camping abroad to avoid tax;
(5) The conclusion that a person is resident abroad is significant too in the context of ICTA 1988, Income and Corporation Taxes Act 1988 section 334s. 334;
(6) Since R (on the application of Gaines-Cooper) v R & C CommrsTAX[2011] BTC 610, it is virtually critical to demonstrate a "complete break", requiring not a complete severance, but a substantial loosening, of ties with the UK.
Against that background, the tribunal considered they should concentrate predominantly on three tests:
First, on and after 5 April 2005, did A make a distinct break from his former way of life, including the commencement of a quite different and intended way of life in Monaco, and can A demonstrate not only the required loosening of ties with family, friends and former business life, but whether his whole way of life changed?
Second, did the London house remain a habitual abode, and more particularly a habitual abode in the UK for a settled purpose, when A was fundamentally living in Monaco?
Third, for how long was A in the UK; can those periods of presence realistically be described as "visits", and were they or were they not for a settled purpose?
In arriving at their decision, the tribunal determined that A did unquestionably acquire a habitual abode in Monaco, for a settled purpose. That purpose was to live the life of a relatively rich man, enjoying the relaxation, the walking and swimming, and the countless attractions that Monte Carlo and the surrounding areas offered. Both the apartments in Monaco were furnished and equipped as homes. S did fundamentally live with A in Monaco, and it was not realistic to say (as for Mr Gaines-Cooper) that A visited the UK to see his wife. Whilst tax was a major consideration, A wanted, and could afford, his new lifestyle in Monaco, and that fitted in well with the tax planning. A and S were clearly resident, applying UK tests, in Monaco, for lifestyle and taxation reasons.
As regards "distinct break", from and after 5 April 2005, A's lifestyle changed very dramatically. He no longer went to work. He was living in Monaco where he had not lived before. There was, to all intents and purposes, a complete severance of A's former business role, hardly surprising when all the properties A had been managing for 30 years had been sold (and part of the reason for the move abroad was that A believed he would otherwise inevitably have been "drawn back into the business" by his brother, which he did not want).
There was also a very significant loosening of A and his wife's "social ties" (ignoring close family members). What had been the Sunday dinner circuit and other similar occasions with their group of friends virtually ceased. They attended only two or three of the major charity lunches or dinners in each year of absence, whereas in earlier years they had attended roughly 15 or 16.
HMRC's most telling contentions related to "family". In the tax year 2005-06, there were 15 Friday night dinners at the London house with their two children, and three major Jewish festivals and family birthdays celebrated together. A had previously acted as main carer for his mother, a responsibility assumed by his brother, but whenever in London A would see his mother once if not twice. However, there was no evidence that visits to London were principally or solely to attend these occasions (they coincided with other purposes, including "stopovers" before long-haul holiday flights, and meetings with accountants concerning failed tax planning undertaken by the M Group); there was at least a significant loosening of ties even as regards these close family occasions.
The London house itself was retained for the simple reason that A and S wished to live there again permanently when they returned to the UK. Having retained it, they might as well use it during visits. But they did not treat it as a habitual home, with life there remaining a settled purpose. The reasons for visiting were not for settled purposes (unlike the airline pilot cases).
Finally, time spent in the UK was a relevant factor. In tax year 2005-06, there were 65 days of presence (inclusive of an element of travel days) and 44 days excluding travel days. But significant that A's presence was not for any settled purpose, rather for varied purposes, several often combined on one occasion, and none habitual or essential. It was apt to describe trips to the UK as "visits".
The overall conclusion was that on 5 April 2005, A left to commence a quite different lifestyle in Monaco; he did make a habitual home there, and adopted a lifestyle for various personal reasons, going well beyond merely camping abroad to avoid tax. There was a "distinct break" - severing virtually every active business consideration; a very substantial loosening of ties with friends; A saw a reasonable amount of, but materially less than in previous years, of his children. The London house was retained for a reason that had nothing or very little to do with interim use, and visits were made for various different purposes, none fundamentally required. "Visits" was the correct term to describe the same. And whilst these visits were quite regular, a house in the UK is less likely to be a "habitual or settled abode" where there are numerous "stopovers" and not long extended periods.
The overall balance was of a new life in Monaco, with periodic visits back to London. A was resident in Monaco in 2005-06; but not dual-resident, and not resident in the UK in that year.
This is an interesting case, and good to see a taxpayer succeeding on the "distinct break"...
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