R (on the application of Davies and another) v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | LORD HOPE,LORD WALKER,LORD WILSON,LORD CLARKE,LORD MANCE |
| Judgment Date | 19 October 2011 |
| Neutral Citation | [2011] UKSC 47 |
| Court | Supreme Court |
[2011] UKSC 47
Lord Hope, Deputy President
Lord Walker
Lord Mance
Lord Clarke
Lord Wilson
Appellant (Davies
David Goldberg QC
Nicola Shaw
(Instructed by PricewaterhouseCoopers Legal LLP)
Respondent
James Eadie QC
Ingrid Simler QC
Akash Nawbatt
Christopher Stone
(Instructed by HMRC Solicitor's Office)
Appellant (Gaines-Cooper)
Lord Grabiner QC
Conall Patton
(Instructed by Squire, Sanders & Dempsey (UK) LLP)
Respondent
James Eadie QC
Ingrid Simler QC
Akash Nawbatt
Christopher Stone
(Instructed by HMRC Solicitor's Office)
Heard on 6 and 7 July 2011
In 1999 the Inland Revenue, as it was then known and to which I will refer as the "Revenue", published a revised version of a booklet known as IR20 and entitled "Residents and non-residents—Liability to tax in the United Kingdom". The 1999 version of the booklet, which remained operative until 2009 and which I will call the booklet, offered general guidance upon the meaning of the word "residence" and of the phrase "ordinary residence" in the context of an individual's liability for UK income tax and capital gains tax. The present appeals require the court mainly to construe the guidance in the booklet. For the main contention of the appellants is that, on its proper construction, the guidance contained a more benevolent interpretation of the circumstances in which an individual becomes non-resident and not ordinarily resident in the UK than is reflected in the ordinary law and that the appellants had a legitimate expectation, to which the court should give effect, that the more benevolent interpretation would be applied to the determination of their status for tax purposes. Their subsidiary and alternative contention is, that, even if, when properly construed, the guidance did not contain a more benevolent interpretation than is reflected in the ordinary law, it was the settled practice of the Revenue to adopt such an interpretation of it and that the practice was such as to give rise to a legitimate expectation, to which again the court should give effect, that the interpretation would be applied to the determination of their status.
The latter limb of each of the appellants' alternative contentions is not in dispute. The Revenue accepts that, if either the proper construction of the booklet or its settled practice was as they contend, a legitimate expectation arose which requires that their status for tax purposes should be determined in accordance with the allegedly more benevolent interpretation of the circumstances in which an individual becomes non-resident and not ordinarily resident in the UK.
The issues arise within applications for judicial review. Mr Davies and Mr James ("the first appellants") issued their application in February 2007. They sought judicial review of determinations by the Revenue dated 28 November 2006 that they had each been resident and ordinarily resident in the UK for the tax year 2001–02. Mr Gaines-Cooper ("the second appellant") issued his application in April 2007. He sought judicial review of a determination by the Revenue dated 25 January 2007 that he had been resident and ordinarily resident in the UK for the tax years from 1993–94 to 2003–04. In each application the appellants contended that, by reference to the allegedly more benevolent interpretation contained in the guidance or adopted by the Revenue in accordance with its settled practice, the determinations were erroneous.
In addition to the issue of their application for judicial review the first appellants filed a notice of appeal to the special commissioners—which would now be heard by the Tax Chamber of the First-tier Tribunal—against the determinations of the Revenue dated 28 November 2006. There was a dispute as to whether their application or their appeal should first be determined. On 10 July 2008 the Court of Appeal, in my view correctly and irrespective of its reasoning, ruled that the application should first be determined and it therefore remitted to the Administrative Court the question whether permission to apply for judicial review should be granted. The appeal of the first appellants to the commissioners has been stayed pending determination of the present proceedings.
But the course taken in the case of the second appellant was different. The Revenue's determination dated 25 January 2007 accorded with assessments for the years from 1992–93 to 2003–04 which it had raised against him in 2005 and against which he had appealed to the commissioners. In June/July 2006, at a hearing which proceeded for ten days, the commissioners conducted a trial of preliminary issues whether he had been:
(a) domiciled in the UK from 1992–93 to 2003–04;
(b) resident in the UK from 1993–94 to 2003–04; and
(c) ordinarily resident in the UK from 1992–93 to 2003–04.
I will explain in para 24 below why he did not dispute that he had been resident in the UK in 1992–93. In the event, by Decision dated 31 October 2006, the commissioners held that he had been domiciled, resident and ordinarily resident in the UK during all those years respectively. Against their conclusion in respect of domicile the second appellant appealed, on point of law, to the High Court; on 13 November 2007 Lewison J dismissed his appeal. The result is that the second appellant, can no longer dispute that he was domiciled in the UK from 1992–93 to 2003–04; but his UK domicile is irrelevant to the present proceedings. Nor can he continue to dispute that, according to the ordinary law, he was resident in the UK from 1993–94 to 2003–04 and ordinarily resident in the UK from 1992–93 to 2003–04. His case is, however, that, by reference to either of the contentions set out above, the ordinary law does not govern determination of the issue surrounding his UK residence and ordinary residence during those years.
It is unfortunate that, for whatever reason, the course taken in the case of the first appellants was not taken in the case of the second appellant. Were either of his contentions in the present proceedings to prevail, it would follow that the commissioners invested a large amount of time—as well as a conspicuous degree of care—in application to the issues of his residence and ordinary residence of principles inapplicable to them. In their Decision they expressly noted that their function was to apply the law rather than the guidance in the booklet. But, whereas issues of fact between the Revenue and the first appellants in relation to their circumstances in 2001–02 remain unresolved, the now conclusive resolution by the commissioners of the issues of fact between the Revenue and the second appellant in relation to his circumstances from 1992–93 to 2003–04 at any rate throws the effect of these proceedings into sharp relief. For, although it remains an open question whether, upon application of the ordinary law, the first appellants were resident and ordinarily resident in the UK during the year relevant to them, we know that, upon application of the ordinary law, the second appellant was resident and ordinarily resident in the UK during the years relevant to him. As the appellants rightly stress, a legitimate expectation that the ordinary law will apply to them is a matter of no legal significance in that it adds nothing to the right of every citizen to due application to him of the ordinary law.
A complication, to which I will turn in para 30 and para 31 below, is that, while they all contend for what I have described as a more benevolent interpretation of the circumstances in which a taxpayer becomes non-resident and not ordinarily resident in the UK than is reflected in the ordinary law, the benevolent interpretation for which the first appellants contend is not identical to that for which the second appellant contends. I infer that it is the unchallengeable findings of fact made by the commissioners against the second appellant which drive him to contend for a more ambitious interpretation than that for which the first appellants now contend.
In the Administrative Court permission to apply for judicial review was refused in both cases—by Wilkie J on 10 October 2008 in the case of the first appellants and by Lloyd Jones J on 3 November 2008 in the case of the second appellant. All the appellants appealed against the refusals and, when granting permission to appeal, the Court of Appeal listed the appeals to be heard together. On 10 July 2009 the court allowed their appeals against the refusals and, pursuant to CPR 52.15(4), directed that it should itself, on a later date, hear their applications for judicial review. The hearing took place on 4, 5 and 6 November 2009 and judgments were handed down on 16 February 2010. The court (Ward, Dyson and Moses LJJ) thereby dismissed the applications for judicial review and it is against the dismissals that the present appeals are brought.
The first appellants are successful property developers. By March 2001, then based in Swansea, they each held 50% of the preference shares in Liberty Property Holdings Ltd ("Liberty"). They were also prominent in the administration of Swansea Rugby Football Club and were respected members of the local community. They decided to extend their property development business to Brussels. Whether their decision was related to a possible disposal of their shares in Liberty appears to be in dispute. At all events, in March 2001, they caused a company, in which each of them had a one-third shareholding, to be incorporated in Belgium. Furthermore they began to rent furnished...
To continue reading
Request your trial
-
Uk Uncut Legal Action Ltd v Commissioners of HM Revenue and Customs Goldman Sachs International and Another (Interested Parties)
...Diplock has not changed. In R (on the application of Davies) v R & C Commrs; R (on the application of Gaines-Cooper) v R & C CommrsTAX[2011] BTC 610 at [26] Lord Wilson said, The primary duty of the revenue is to collect taxes which are properly payable in accordance with the current legisl......
-
Patel and Another
...inherent in HMRC's duty of management was also considered by Lord Wilson in R (on the application of Gaines-Cooper) v R & C Commrs [2011] BTC 610, in the Supreme Court, cases which concerned published Revenue guidance on the meaning of “residence” and “ordinary residence”. At [26] Lord Wils......
-
B v B (Assessment of Assets: Pre-Marital Property)
...v The Commissioners for HM Revenue & Customs; R (on the application of Gaines-Cooper) v The Commissioners for HM Revenue & Customs [2011] UKSC 47). Indeed, having regard to paragraph [45] of the decision of the Supreme Court, it is difficult to imagine how the husband could have established......
-
Rowe and Others v Revenue & Customs Commissioners
...R v Inland Revenue Commissioners Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545 at p.1570B and Davies & Anor v Revenue and Customs [2011] UKSC 47). 90 It is only in an exceptional case that a claim that a legitimate expectation has been defeated will succeed in the absence of a clear an......
-
Breaking Ordinary Residence For Tax Purposes: - An Ongoing Saga...
...status. The recent UK Supreme Court judgment in the case of Robert John Davies, Michael John James and Robert Gaines-Cooper v HMRC [2011] UKSC 47, highlights that a mere absence from your home country for determined periods subsequent to exit is not sufficient for the purposes of breaking r......
-
Citizenship by Naturalisation: Are Regulations 3(2)(b) and (c) to the South African Citizenship Act 88 of 1985 Invalid?
...his o r her affairs”100 Also, see ITC 1807 68 SATC 154 For a foreign law per spective, see R (Da vies) v HMRC; R (Gaines Cooper) v HMRC 2011 UKSC 47; Lynette Da wn Yates v HMRC 2012 UKFTT 568 ( TTC)101 Also, see I TC 1170 34 SATC 76 102 A meaning i s ascribed to s tatutory wor ds according ......
-
Beyond the Real and the Paper Deal: The Quest for Contextual Coherence in Contractual Interpretation
...the law of contract interpretation’(2015) LMCLQ 406. For example, McLauchlan cites Lord Clarke’s statement in Rainy Sky SAvKookmin Bank [2011] UKSC 47; [2011] 1 All ER 175 that ‘[w]here the parties have usedunambiguous language, the court must apply it’ (at [23]), see discussion at 423-427.......
-
A Changing Role for the Administrative Law of Taxation
...Movement’). R(Cameron) v. HMRC; R (Palmer) v. HMRC [2012] EWHC 1174 (Admin) (Cameron).R(Davies) v. HMRC; R(Gaines-Cooper) v. HMRC [2011] UKSC 47, [2012] 1 All ER 1048.R(Greenwich Property Ltd) v. Customs and Excise Commissioners [2001] EWHC 230 wich Property’). R(Wilkinson) v. IRC [2005] UK......