A UK taxpayer living principally in Spain was found to have maintained UK residence and closer links to the UK than to Spain.
The taxpayer spent at least 183 days in Spain in all but one of the tax years 2000/01 to 2006/07 inclusive. This meant that she did not spend 183 days in the UK in those years (the sole statutory test for UK residence currently). However, it was determined by the First-tier Tribunal that she had maintained sufficient links to the UK that she had not broken UK residence. One of the main factors in reaching this decision was that her husband remained resident in the UK.
It was accepted that she was also resident in Spain under Spanish domestic law. The double tax agreement between the two countries provides a “tie-break” in cases of dual residence such that an individual will be regarded as resident in one country only. On application of the treaty provisions, the Tribunal found that the taxpayer’s centre of vital interests (economic and personal ties) was in the UK and not Spain. As such, she was resident in the UK and not resident in Spain with the result that she was liable to capital gains tax on gains she realised following the disposal of shares transferred to her by her husband after she had moved to Spain.
This is another example of how difficult it is for UK nationals to break UK residency. This case also demonstrates that establishing residency in another jurisdiction is not necessarily sufficient.
Decision of the First Tier Tribunal (Tax) – Release date: 22 August 2012
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