Another residence victory for HMRC

The First Tier Tribunal – in Rupert Kimber [2012] UKFTT 107 (TC) published on 27 February – has ruled in favour of HMRC in yet another residence case.  This case provides a useful insight into how the tribunal applies the current rules on residence.

RK had been a partner of the asset management firm Cazenove & Co and was the head of the Japanese office. He was not resident in the UK between September 1997 and at least July 2005.

RK came to the UK on holiday in July 2005 and handed in his Japanese residency permit as he left Japan. He signed an employment contract with a UK company and a lease on a UK property while he was in the UK. He then went on holiday to Italy for a month with his family. He returned to the UK in September 2005 to start working for a UK company.

While he was outside the UK, RK disposed of shares on 12 August 2005. He contended that this disposal was not taxable as he was not resident in the UK at this date.  He relied on an extra statutory concession A11, which states that where an individual comes to the UK to take up permanent residence, he may split the tax year for income tax year purposes so that he is resident from the date of arrival rather than the beginning of the tax year.  He argued that residence was not established until he arrived to the UK in September 2005 with the intention of living in the UK. He contended that he was not resident in the UK during July as he was only in the UK at this time for a temporary purpose and he had intended to accept a job in Hong Kong at this time.

HMRC argued (i) the extra statutory concession should not be applied and (ii) RK was resident in the UK from 17 July.

The First Tier Tribunal rejected HMRC’s suggestion that the extra statutory concession should not be applied because HMRC had in fact applied the concession and argued the case on the basis that RK was resident in the UK from 17 July 2005 not the beginning of the tax year.

However, the First Tier Tribunal agreed that RK had returned to the UK on a permanent basis on 17 July 2005. Reference was made to the following:

  • RK signed up to a contract of employment while he was in the UK between 17 and 30 July 2005.
  • RK purchased a long lease over a property from the National Trust, which he started to renovate before he arrived to the UK. It was noted that the property could not be sublet. Therefore had RK accepted a job in Hong Kong as asserted, this property would, once renovated, have sat empty for some time at a great expense to RK.
  • RK had booked places for his eldest two daughters at a school in Norfolk.
  • RK’s belongings had been shipped from Japan to the UK in June 2005. The Tribunal held that if RK was more likely than not to accept the job in Hong Kong then he would not have shipped his belongings from Japan to the UK.

If you have a client who is arriving to the UK to permanently live here, you need to look at all the factors when deciding whether he is resident in the UK. This includes:

  • whether he has been resident in the UK before;
  • how many days he spends here;
  • the pattern of his presence in the UK or absence from it over a period of years;
  • whether his purpose for being in the UK is settled or temporary;
  • his family, social and work ties to the UK; and
  • his accommodation arrangements.

For further information on tax residence call the TaxDesk on 0845 4900 509 and ask for Priya Dutta or Paul Bramall.