How often can you visit the UK and still be a non-resident for tax purposes? It’s a hot question among expats in the light of the recent Court of Appeal decision on millionaire Robert Gaines-Cooper’s affairs.
The 72 year old moved to the Seychelles in the 1970s, purchasing a mansion with the millions that he made from his businesses in the music and medical industries. But whilst he “fell in love” with the place, he still kept significant ties with the UK.
Those ties seem to have been his downfall. Gaines-Cooper thought he was playing by the rules by spending less than 91 days per year in the UK. However, he kept a house in Henley-on-Thames, where he kept his valuable collection of paintings and guns. His son had been educated at an English school, and his second wife had lived for some time on their Henley estate. These factors were among the reasons the judges gave for their decision that Gaines-Cooper was liable to pay tax in the UK.
So if the 91 day rule no longer applies, how can you tell if a UK citizen is considered resident for tax purposes? The Court of Appeal based their decision on the principle that the UK was Gaines-Cooper’s “centre of gravity of his life and interests”. This nebulous concept will send a chill down the spines of non-residents everywhere. After all, no two situations are the same, and
Her Majesty’s Revenue and Customs, on the other hand, was pleased with the decision. Their spokesman stressed the importance the Revenue attaches to being able to collect tax retrospectively:
“It is also useful that the Court of Appeal has acknowledged that HMRC can increase compliance activity in an area so that it can ensure it catches those who may have previously not paid tax that is due.”
As if this was not scary enough, the taxman added a further warning:
“HMRC are committed to ensure that all those who are resident in the UK pay the tax that is due and this judgment will aid that effort.”
Clearly this judgment will affect everyone who considers himself to be a non-resident. This includes people who have transferred their UK fund into a Qualifying Recognised Overseas Scheme, in an attempt to stop paying UK income tax whilst living abroad.
The case underlines the importance of getting good QROPS advice before you leave the UK. The consequences of a HMRC decision to claim back tax can be horrendous. Mr Gaines-Cooper faces a bill in the region of £30million for liabilities stretching back as far as 1993.
And the real irony here? According to Grant Thornton’s tax director Mike Warburton, Gaines-Cooper’s parents were both tax inspectors.
