United Kingdom
19 October 2011 - Supreme Court rules against Gaines-Cooper and Davies
The Supreme Court has ruled against the taxpayers in the case involving reliance on HMRC's former IR20 guidance on UK residence.
Mr Gaines-Cooper had contended that, in the IR20 guidance, the then Inland Revenue represented that a taxpayer would be accepted as not resident and not ordinarily resident in the UK if he went to live abroad for at least three years and satisfied the day-count test, rendering it unnecessary to consider whether he had effected a distinct break in the pattern of his life in the UK.
Mr Davies and anoher appellant, Mr James, had contended that under the IR20 guidance they should be treated as not resident and not ordinarily resident in the UK because they went abroad for a settled purpose for at least one tax year and satisfied the day-count test, whether or not they had effected a distinct break in the pattern of their life in the UK.
The taxpayers also argued that the Inland Revenue had departed from a settled practice with regard to the way in which they dealt with claims to non-residence, and in respect of which they had a legitimate expectation of being treated in accordance with that practice.
In a 4-1 decision, the Court held that:
- taken together, the contents of the IR20 guidance did indicate the need for a "multifactorial evaluation" of a taxpayer's circumstances when determining whether they had ceased to be UK-resident (except when leaving to take up full-time employment abroad), and that the requirements did amount to the need for a "distinct break", which the taxpayers had failed to effect; and
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the Inland Revenue had not departed from a settled practice.
The dissenting Judge considered that, rather than implying a case law test of a distinct break, the IR20 guidance introduced a series of delineated cases into which, if a taxpayer fell, they would be treated as not resident or ordinarily resident in the UK. He considered that it would be remarkable if the guidance had intended to indicate that a distinct break was required, without clearly expressing this.
This may still not be the end of the matter, as Mr Gaines-Cooper has reportedly stated that he will now consider taking the case to the European Court.