The final blow for Mr Gaines-Cooper

Following a long legal battle with HMRC Robert Gaines-Cooper, along with the parallel case of Davies & Another, have been handed another blow.  The Supreme Court has handed down its judgement in a 4-1 decision in favour of HMRC.  These long running cases have largely centred around the expectation a taxpayer may have when relying on HMRC guidance.  In this case the guidance was contained in booklet IR20 relating to Residence and Ordinary residence in the UK for tax purposes. All of the taxpayers claimed that they had relied on IR20 to break their residence status and although they complied with the guidance, HMRC interpreted the guidance differently.  The case has been important in determining to what degree a taxpayer may legitimately expect HMRC guidance to be adhered too.

One of the taxpayer’s main arguments was that HMRC had changed their practice in their interpretation of IR20.  This particular point was refuted by HMRC, although the profession at large has contended that this was the reality.

The decision against the taxpayers will allow HMRC to conclude the ongoing enquiries into residency that were waiting on these decisions, largely in their favour.  Millions of pounds of tax are likely to be collected and further cases will commence.

If any of your clients residency position is under enquiry then it may be that they still have an opportunity to defend their position.  Although this judgement sets a precedent, any case with a materially different fact set may still be successfully defended.  In particular, cases where the client has taken up residence in a country with which the UK has a double tax treaty may still have protection if the other jurisdiction believes him to be resident there.  

Going forward, the proposed new Statutory Residence Test (SRT) effective from 6 April 2012 will remove much of these uncertainties for taxpayers.

Gabelle can offer advice on cases under enquiry and review the fact set to determine avenues of argument or, in the case of treaty countries, offer advice on claiming treaty protection. Also for individuals proposing to leave the UK after 6 April 2012 the new SRT will be applicable. To discuss these issues or find out more contact the TaxDesk on 0845 4900 509 and ask for Paul Bramall