UK News

Gaines-Cooper - Supreme Court decision on tax residence

December 2011

Mr Gaines-Cooper has lost his appeal in the Supreme Court, which agreed with the Court of Appeal’s decision that he had not ceased to be resident in the UK for the years under dispute.


This case centres on the IR20 booklet, which was the Inland Revenue’s (now HMRC) guidance on UK residence.

The issues

Mr Gaines-Cooper claimed non-resident status in the UK on the grounds that he had left the UK to live abroad and that the number of days he spent in the UK in every year since his departure were within the permitted amount of days set out in IR20 for continued non-residence.  He claimed that as he adhered to the rules within HMRC’s own guidance, it should be bound by such guidance and accordingly it should agree that he was not UK resident.

HMRC agreed that it was bound by IR20 (and its guidance generally) where that guidance was applicable to the situation.  However, it claimed that the paragraphs in question referred to people who have made a distinct break with the UK and that the day counting test is only of relevance once non-residence has been achieved.  In its view Mr Gaines-Cooper had not made a distinct break with the UK and therefore had remained resident in the UK.

The Decision

Although it was recognised that the paragraphs of IR20 in question were badly drafted, the Supreme Court held that IR20 would enable “an ordinarily sophisticated taxpayer’” to understand that there was a requirement for a distinct break with the UK to establish non-residence.  Due to Mr Gaines-Cooper’s ties with the UK, he was unable to demonstrate a distinct break and therefore the day counting test did not apply.

Mr Gaines-Cooper is considering an appeal to the European Court of Justice.


This judgment provides some clarity to taxpayers in as much as they have a legitimate expectation that HMRC will be bound by its own guidance.

With the proposed introduction of the statutory residence test in 2013 the effects of this case may be reduced.


Proposed new residency test - Complexity replaces uncertainty?
Proposed new statutory residence test – some reflections
Reforms to taxation of non-domiciles proceed as statutory residence test is delayed

For further information or to discuss the issues raised, please contact John Mooney, Bina Gayadien or Stephen Wright on +44 20 3051 5711.