Turberville v HMRC
| Jurisdiction | UK Non-devolved |
| Judgment Date | 03 February 2010 |
| Neutral Citation | [2010] UKFTT 69 (TC) |
| Date | 03 February 2010 |
| Court | First Tier Tribunal (Tax Chamber) |
[2010] UKFTT 69 (TC)
John F Avery Jones CBE (Chairman), Roger Berner (Tribunal Judges)
Robert Maas, chartered accountant, Blackstone Franks LLP, for the Appellant
Timothy Brennan QC, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents
Ordinary residence - taxpayer going to work in the US from 1 July 2001 on a three-year contract, being made redundant on 31 October 2002 returning to assist the administrators of the company until moving to live in Monaco at the beginning of December 2002 - ordinarily resident for 2001-02 but not 2002-03
The tribunal found that the taxpayer was ordinarily resident in the UK in 2001-02 and not ordinarily resident in 2002-03.
This was an appeal by the taxpayer against a statutory determination that he was ordinarily resident in the UK for the years ended 5 April 2002 and 2003.
The taxpayer was born and educated in Scotland where he qualified as an accountant. He then worked for Shell International in the oil industry for some 20 years. He was then engaged by a US energy group on a three year contract to integrate newly acquired European subsidiaries into the group.
Accordingly, in July 2001 he moved to Dallas. The group was adversely affected by the events of 11 September 2001 and more particularly by the collapse of Enron at the beginning of December 2001. Market confidence in energy companies was lost and the group did not have the financial capacity to support its trading exposures. Additional capital was required to support the investment grade rating. It was forced in 2002 to sell off its international operations and to place its UK business into administration. The taxpayer was made redundant on 31 October 2002. He agreed to provide consulting services until 31 January 2003 under a separate contract principally to the administrators in the UK. He went to live in Monaco where he had rented an apartment from December 2002.
The taxpayer signed a severance agreement governed by Texan law in November 2002 under which he was paid compensation which was received in December 2002, and the appeal was principally concerned with the taxability of that compensation.
The taxpayer's case was that he had abandoned his ordinary residence in 2001-02 and had not resumed it in 2002-03 and that there was a complete break in his lifestyle when he became based in Dallas under a contract continuing for three years. HMRC contended that he only worked abroad for some 16 months from July 2001 to October 2002, not covering a complete tax year, and even then paid frequent visits to the UK where he retained a house and a flat.
Whether the taxpayer was ordinarily resident for the 2001-02 and 2002-03 tax years.
The tribunal (Judge John F Avery Jones CBE and Roger Berner) held that the taxpayer was ordinarily resident in the UK in 2001-02 but not ordinarily resident in 2002-03.
In relation to 2001-02, while it was clear in February 2001 that he would go to Dallas in July 2001, that did not change the quality of his residence between 6 April 2001 and 30 June 2001, which was a continuation of his residence during the previous four tax years. Although it was then known that such residence would cease about 1 July 2001 it was nevertheless part of his residence for settled purposes and the fact that the taxpayer's state of mind was such that he would be leaving the UK at around that time did not, until his actual departure, alter the position.
From the date of actual departure, in deciding whether there was then a distinct break, the tribunal considered the position as it was in July 2001 without the benefit of hindsight. The three-year employment contract, coupled with his expenditure on furnishing a US apartment rented by his employer, pointed to a distinct break. The fact that he was in line for the chairmanship and chief executive position in the group made that potentially an even longer term change in his lifestyle.
The claim in his US tax return to be UK resident was not in the circumstances evidence that contradicted his employment position and other facts demonstrating a distinct break. The facts taken together demonstrated a distinct break in his lifestyle which would support his ceasing to be ordinarily resident. Nothing had changed to throw doubt on that conclusion by the end of the tax year. Accordingly, the taxpayer continued his previous ordinary residence in the UK from 6 April 2001 to around 1 July 2001 and there was then a distinct break in his residence. The tribunal would have liked to decide that he was not ordinarily resident from about 1 July 2001, but considered that it was not open to it to split the tax year (Elmhirst v IR Commrs [1937] 2 All ER 349). As the taxpayer had been ordinarily resident for part of 2001-02, he was ordinarily resident for the year. It was, of course, open to HMRC to split the year.
In relation to 2002-03 it followed from the finding that the taxpayer made a distinct break in his pattern of life from about 1 July 2001 that on 6 April 2002 he was not ordinarily resident. He lost his job in Dallas at the end of October 2002 and the consulting agreement required him to help the administrator in the UK until 31 January 2003, which in practice seemed to have ended in November 2002. He had rented an apartment in Monaco from December 2002.
The retention of the house and flat in the UK was fairly neutral: he had retained UK property throughout the time he was working abroad.
Looking at the position at the end of October 2002 when his employment with the group ceased prematurely he might have resumed living in the UK as he had been until 1 July 2001 in which case his ordinary residence would become the UK again. But the facts did not support that. When looking for a person's residence "for settled purposes as part of the regular order of his life, whether for short or long duration" (Barnet LBC v Shah[1983] 2 AC 309) the tribunal had to take into account events that upset such regular order. Here there was the upheaval caused by losing his job based in Dallas that would contractually have continued until June 2004, the short-term consulting requirement to assist the liquidator in the UK until the end of January 2003, and taking a lease of the property in Monaco and acquiring a carte de sejour there, which involved trips between the UK and Monaco on five occasions between November 2002 and January 2003. During November and December 2002 it was not possible to say that the taxpayer had a regular order of life anywhere; it was a time of transition. The time he spent in the UK after October 2002 could not be treated as part of a pattern starting from his residence in the UK before going to Dallas. His physical presence was no more than a stop-gap measure. Looking back from 5 April 2003, he was not ordinarily resident in the UK during 2002-03.
1. This is an appeal against a statutory determination of ordinary residence made on 7 March 2008 that Mr PG Turberville was ordinarily resident in the UK for the years ended 5 April 2002 and 2003. The Appellant was represented by Mr Robert Maas of Blackstone Franks LLP; the Respondents ("HMRC") were represented by Mr Timothy Brennan QC.
2. We had two bundles of documents and we heard evidence from Mr Turberville and his wife Mrs Jean Turberville. We find the following facts:
(2) The Appellant was born in Aberdeen in 1951. He was educated in Scotland and became a member of the Institute of Chartered Accountants of Scotland in 1975 after articles with Meston & Co (now part of Deloittes). After working in their Aberdeen and Edinburgh offices he decided to move into the oil industry and joined Shell, moving to their international staff in 1979. He worked for Shell International in the following locations:
New Plymouth, New Zealand: October 1979 to August 1981
Wellington, New Zealand: September 1981 to June 1983
Al Jubail, Saudi Arabia July 1983 to August 1985
Sarawak, Malaysia: September 1985 to June 1988 (at this point he separated from his first wife and they were divorced in 1989)
London: September 1988 to January 1991 (his present wife moved in with him in July 1990 and they were married in March 1991)
Lagos, Nigeria: January 1991 to August 1993
Houston, Texas: September 1993 to January 1997
London: February...
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Da Silva
...order of his life, whether for short or long duration “one must take into account events that upset such regular order” (see Turberville [2010] TC 00381 (at 9)). [18] A person will be ordinarily resident in the UK for a tax year if he is ordinarily resident for any part of that tax year. Bu......
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Da Silva
...order of his life, whether for short or long duration “one must take into account events that upset such regular order” (see Turberville [2010] TC 00381 (at 9)). [18] A person will be ordinarily resident in the UK for a tax year if he is ordinarily resident for any part of that tax year. Bu......
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Carey
...happened here. There was a distinct break.[50] This was the approach followed by this tribunal in the more recent case of Turberville TAX[2010] TC 00381. In that case it was held that the taxpayer did not cease to have a settled purpose as regards the UK as soon as he formed the intention t......
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...(www.bailii.org/uk/cases/UKFTT/TC/2010/TC00366.html). http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00381.html http://www.bailii.org/ew/cases/EWCA/Civ/2010/83.html (www.bailii.org/ew/cases/EWCA/Civ/2010/83.html). This article was written for Law-Now, CMS Cameron McKenna's free online infor......