Revenue and Customs Commissioners v Glyn
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 October 2015 |
| Neutral Citation | [2015] UKUT 551 (TCC) |
| Date | 12 October 2015 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
The Hon Mr Justice David Richards
Akash Nawbatt and Sebastian Purnell, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Appellants
Patrick Way QC and Emma Chamberlain, counsel, instructed by Pinsent Masons LLP appeared for the Respondent
Income tax Whether respondent was non-UK resident in 2005/06 tax tear Retention of respondent's home in the UK to which he returned on a number of occasions Whether First-tier Tribunal had made findings of fact justified by the evidence Whether First-tier Tribunal had applied the correct tests as a matter of law Appeal allowed and case remitted to First-tier Tribunal for new hearing.
The Upper Tribunal allowed HMRC's appeal. It said the First-tier Tribunal (Glyn TAX[2013] TC 03029) had made errors of law in reaching its decision that the taxpayer was not resident in the UK in the 2005/06 tax year, and its decision could not stand. The case was remitted for re-hearing before a differently constituted First-tier Tribunal.
The taxpayer (G) was a British citizen and passport holder, aged 56 at the beginning of 2005. G was married, with two children of 29 and 24 at that time, neither of whom lived at home. G and his wife (S) had owned their current house in North London since 1993, and the house was close to G's mother, their children, and their circle of friends.
G 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. G'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 G's brother) outside the M Group.
By 2005, G 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. G had also decided he should emigrate (for the indefinite future at least): avoiding tax on an 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 G and his brother).
G and S acquired an apartment in Monaco and on 5 April 2005 G 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, G spent at least 200 days there each year. There were numerous foreign holidays. G made 22 visits to the UK in tax year 2005/06, invariably spending 2 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; G 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 G to income tax in 2005/06, as UK resident in receipt of a dividend of 22m, was that the London house remained an habitual abode; and there was no distinct break, G had continued to participate in the business, and there had been no substantial loosening of family and social ties.
The judge said the First-tier Tribunal's decision contained a detailed account and analysis of the evidence and detailed consideration of the factors which it took into consideration in reaching its decision. The FTT had considered it should concentrate predominantly on three tests:
First, on and after 5 April 2005, did G 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 G 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 an habitual abode, and more particularly an habitual abode in the UK for a settled purpose, when G was fundamentally living in Monaco?
Third, for how long was G in the UK; can those periods of presence realistically be described as visits, and were they or were they not for a settled purpose?
The FTT had, the judge said, helpfully summarised its conclusions. Its overall conclusion was that on 5 April 2005, G 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; G 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 those visits were quite regular, a house in the UK was less likely to be a habitual or settled abode where there were numerous stopovers and not long extended periods.
The overall balance, the FTT had decided, was of a new life in Monaco, with periodic visits back to London. G was resident in Monaco in 2005/06; but not dual-resident, and not resident in the UK in that year.
The grounds of appeal were that the FTT:
1) Failed to consider whether the necessary distinct break had been effected by 5 April 2005 rather than on and after 5 April 2005 and failed to take into account and address the inherent implausibility that an individual who has always been UK resident will be able to effect the necessary distinct break overnight, which is what G was required to establish given that he claimed to have left on 5 April 2005.
2) Impermissibly and in any event erroneously applied the concept of settled purpose in determining whether (a) G had made the necessary distinct break with the UK; and (b) whether he retained a habitual or settled abode in the United Kingdom.
3) In considering the significance of the retention of the London property, focussed on the reason for its retention rather than the fact and quality of its retention and continued use.
4) Made findings that the dominant real reason for the retention of the London house was the desire to live there at the end of the intended 5 year period of claimed non-residence and had nothing or at least very little to do with interim use whilst G and S were in Monaco which were contrary to the contemporaneous documents, witness evidence and the submissions of both parties.
5) Failed to carry out the correct balancing exercise in determining whether G had made the necessary distinct break, failing to take into account relevant considerations and taking into account irrelevant considerations.
The judge noted two preliminary, general points which he said were not in dispute, but were of particular relevance in G's case:
a) that it was entirely possible for a person to have more than one country of residence; and
b) that the approach to whether a person resident in the United Kingdom has ceased to be so resident was in some respects different from the approach to whether a person previously resident in another country has become resident in the UK.
He then set out Lewison J's summary in the Grace case (cited with approval in the Court of Appeal (Grace v R & C Commrs TAX[2009] BTC 704)) of the relevant legal principles, before addressing the specific grounds of appeal.
The judge said there was no substance to the first ground of appeal. It was clear from the evidence that G's departure for Monaco was preceded by a long period of planning, including obtaining the lease of an apartment in Monaco and a residence permit. His departure was the culmination of careful preparation and planning and not a sudden or overnight event.
HMRC had though made good all other grounds of appeal, as follows:
Ground 2: the FTT had adopted and applied a legally irrelevant test whether G had a settled purpose, or a single dominant purpose, for his visits to the UK when considering the significance of G's return visits to the UK. In the judge's view, the reasons for G visits were relevant, but what was irrelevant was whether they demonstrated any settled purpose.
Ground 3: there was no basis in the authorities for considering that the reasons for the retention of a house in the UK, still less the dominant reason for doing so, were relevant to whether the individual continued to be resident in the UK. There might be some circumstances in which it had some relevance, but in a case such as the present where G returned on a number of occasions to his London house, the issue was to determine whether the frequency and nature of his visits, and generally the quality of his presence in the UK, meant that he continued to be resident in the UK. The FTT had focused on considerations which were either not relevant or only marginally relevant and failed to address this issue.
Ground 4: there was no proper basis in the evidence for the conclusion that there was a single, dominant or fundamental reason for the retention of the London house (being, the FTT had determined, for the purpose of living there when G and S returned permanently to the UK) or for the implicit finding that the other reasons given by or on behalf of G were not...
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