TC03022: Stephen Norman Rumbelow and another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 31 October 2013 |
| Neutral Citation | [2013] UKFTT 637 (TC) |
| Date | 31 October 2013 |
| Court | First Tier Tribunal (Tax Chamber) |
[2013] UKFTT 637 (TC)
Judge Jonathan Cannan, Mrs Marilyn Crompton.
Mr John Green of Cobham Murphy Chartered Accountants appeared for the Appellants
Ms Kim Tilling of HM Revenue & Customs appeared for the Respondents
Capital gains tax - residence - whether appellants were resident in the UK - on facts, yes - preliminary issue determined in favour of the respondents.
The taxpayers appealed against amendments to self-assessments and against discovery assessments relating to tax years 2001-02 up to 2004-05. On the preliminary issue as to the taxpayers' residence in the UK for each of these years, the First-tier Tribunal determined that their settled and usual abode was in the UK in 2001-02 and 2002-03, and they remained UK resident in those years; and that, due to insufficiency and in some respects unreliability of the taxpayers' evidence as to where they were, the tribunal was not satisfied that they ceased to be UK resident during 2003-04 or 2004-05.
Prior to the tax years in question the Appellants (Mr and Mrs R) were resident and ordinarily resident in the UK. They had three daughters, the youngest (K) was aged 15 in April 2001. The Appellants left the UK on 4 April 2001, travelling to Belgium. On 1 June 2001 they took possession of an unfurnished flat there. They applied for and were granted residency status from 11 June 2001 pursuant to Belgian law. They purchased a plot of land in Portugal on which a villa was built by a developer. In or about September 2002 (around the time the villa became available to them), the Appellants were granted residency status pursuant to Portuguese law.
The Appellants' principal assets and business interests in April 2001 comprised:
·Yew Tree Farm, which had been the family home in Cheshire since 1997;
·Swiftcause Ltd, a building company and developer;
·Winnington Hall Ltd, a restaurant and conference centre business, with associated short lease rental units; and
·other property interests held directly, including a property partnership business (Hefferston Hall partnership).
From 2000 the Appellants had begun thinking about leaving, or at least spending more time outside, the UK, partly due to Mrs R's health. They were also considering winding down their business interests; and began to consider becoming non-resident in order to shelter capital gains on asset disposals. By early 2001, they were intending to move out to Portugal, but a change of tax law there led to a change of plan, and the travel to Belgium. In May, July and September 2001 the Appellants took holidays in the Dominican Republic, Portugal and Turkey respectively.
As regards business interests, after April 2001 the Hefferston Hall partnership was dissolved and a number of its property interests disposed of. Winnington Hall was disposed of to the eldest daughter and her husband in December 2001, and Swiftcause ceased trading in November 2003. Some small plots of land in the area were acquired by Mr R between December 2001 and August 2004.
A Schedule prepared by the Appellants in 2004, showing their movements in 2001-02, indicated that they returned five times to the UK in that year. Visits to the UK were generally planned around business meetings. On one occasion Mr R came back because his mother was ill; on another they returned for Mrs R to receive eye surgery at Moorfields. They returned at Christmas for two to three weeks in each of the years in question, staying at Yew Tree Farm which remained fully furnished. When the Appellants were not in the UK, daughter K stayed with her elder sisters, including at Yew Tree Farm at weekends, and sometimes with her grandmother nearby.
The Appellants submitted that:
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(2) they left the UK in April 2001 for a settled purpose, namely to live permanently overseas for the benefit of Mrs R's health, to retire and to improve their quality of life;
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(3) the distinct changes to the pattern of their life could not have been clearer. There was a substantial loosening of family, social and business ties so as to amount to a distinct break; and
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(4) when they returned to the UK they did so as visitors.
The tribunal set out its understanding of the relevant common law by quoting at length from Wilson LJ's judgment in the Supreme Court case of R (on the application of Gaines-Cooper) v R & C CommrsTAX[2011] BTC 610:
"An individual resident in the UK ceases to be resident only if he ceases to have a settled or usual abode in the UK. The phrase "a distinct break" is not an inapt description of the degree of change in the pattern of an individual's life in the UK which will be necessary if a cessation of his settled or usual abode is to take place."
"The requirement of a distinct break mandates a multifactorial inquiry. … However, the references of Moses LJ [in the Court of Appeal in Gaines-Cooper] to the need in law for "severance of social and family ties" pitches the requirement … at too high a level. The distinct break relates to the pattern of the taxpayer's life in the UK and no doubt it encompasses a substantial loosening of social and family ties; but the allowance of limited visits to the UK on the part of the taxpayer who has become non-resident, clearly foreshadows their continued existence in a loosened form."
Accordingly, in deciding whether the Appellants were UK resident for the years in question, it was necessary to consider "the pattern of their lives". In doing so, one was seeking to identify whether they had a settled and usual abode in the UK. The tribunal had to consider whether there was a distinct break in the pattern of their lives after 4 April 2001. In other words a substantial loosening of social and family ties. In answering these questions, one had to take account of all the findings of fact, by way of (in Wilson LJ's phrase) "multifactorial inquiry".
In assessing the facts, the tribunal drew out that most of the Appellants' time spent outside the UK in the period from 4 April 2001 up to 20 January 2002 was spent on holiday. In contrast, time in the UK in this period was spent at what remained, essentially, a family home, where they lived with their youngest daughter. Only in the early part of 2002 was any substantial time spent in Portugal, but even then staying at a friends' villa, whilst they had Yew Tree Farm to live in when in the UK.
Business ties to the UK remained strong in 2001-02. There was evidence that Mrs R, although spending less time than before, continued to work at Winnington Hall after 4 April 2001.
The circumstances in which the Appellants travelled to Belgium and the nature of their stay there did not involve a substantial loosening of social and family ties. Nor did Belgium become their settled and usual abode. This remained Yew Tree Farm in the UK at least until 20 January 2002. From 20 January 2002 to 13 April 2002, the Appellants' stay at the friends' villa in Portugal was in the nature of an extended holiday.
By October 2002 the Appellants owned a villa in Portugal and the likelihood was that they would spend more time in Portugal than had previously been the case. However, looking at the time spent in the UK in 2002-03, the tribunal's view was that their settled or usual abode remained in the UK. If anything, the Appellants spent more time in the UK in 2002-03 than in 2001-02. The tribunal was satisfied there was no distinct break in the pattern of the Appellants' lives during 2002-03 and they remained resident in the UK.
For the vast majority of the 2003-04 and 2004-05 years, the tribunal could not be satisfied where the Appellants were. There was insufficient evidence to reach a conclusion on this, and the evidence that was given could not be accepted without corroboration, partly because in some respects the Appellants' evidence had not been reliable.
The tribunal was satisfied that the Appellants remained resident in the UK during 2001-02 and 2002-03; it was not satisfied that they ceased to be resident in the UK during 2003-04 and 2004-05. The preliminary issue as to residence was therefore to be resolved in favour of HMRC. A possible ancillary issue, as to the applicability of ICTA 1988, Income and Corporation Taxes Act 1988 section 334s. 334, did not need to be considered.
This case, concerned with the old common law test of "residence", takes its lead not unexpectedly from Gaines-Cooper, and the "distinct break" analysis, by reference to social, family and business ties, drawn out by that case. It emphasises too the taxpayer's obligation, on leaving the UK, to provide the evidence that there has been a "cessation of settled or usual abode".
[1]The appellants, Mr and Mrs Rumbelow, each appeal against amendments to their self-assessments for tax year 2001-02 made in closure notices following enquiries into their tax returns for that year. They also appeal against discovery assessments made against each of them for tax years 2002-03 and 2003-04. Mr Rumbelow also appeals against a discovery assessment made against him for tax year 2004-05. The assessments relate to both income and gains for the years in question. The tax which is in dispute is as follows:
| Tax Year | Mr Rumbelow | Mrs Rumbelow |
| £ | £ | |
| 2001-02 | 168,385 | 193,543 |
| 2002-03 | 38,347 | 29,347 |
| 2003-04 | 35,225 | 77,701 |
| 2004-05 | 45,298 | n/a |
[2]The issue which arises on these appeals is whether in those tax years the appellants were resident in the United Kingdom. The case for each of the appellants is the same. Namely, that they departed from the UK on 4 April 2001 and became non-UK resident with effect from that date. Mr Rumbelow's case is that he has remained non-UK resident since then, whilst Mrs Rumbelow says that she became UK resident again in 2008. On this appeal however we are only concerned with the position in the relevant tax years identified above.
[3]We are not concerned in this decision with the amount of the...
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