Holiday-maker becomes UK resident
The First-tier Tribunal has determined that a long-term non-UK resident re-acquired UK residence while on holiday in the UK in July 2005, thereby incurring a substantial capital gains tax liability on the disposal of shares on 12th August of that year.
The case centred on when the individual made the decision in 2005 that he and his family intended to return to the UK on a permanent basis.
The individual had been a long term non-resident of the UK who came back to the UK for a family holiday each year during his period of non-residence. In 2005, the individual was on holiday in the UK from 17th to 30th July. It was accepted that he was not resident in the UK before 17th July 2005. He then left the UK for a month’s holiday in Italy before returning to the UK on 28th August to take up a new permanent employment in the UK on 1st September 2005.
The Tribunal’s decision was that he became resident in the UK at some point during that holiday and rejected his claim that he came here in July for a temporary purpose. Its decision was based on a number of facts including;
- At some point between 17 July and 30 July 2005, he had accepted a permanent role to work in the UK from 1 September 2005.
- His furniture and belongings were shipped from Japan to the UK in July 2005.
- His daughters were enrolled to attend a school in the UK from September 2005.
- A copy of an agreement to lease accommodation in UK was in existence on 27th July 2005 which clearly indicated that a decision to take the lease had been made on or before that date.
The opening comment in the judgement that was delivered was that this was a simple case. Given the facts, that is probably a fair statement. However, of significant concern is that while HMRC conceded the availability of extra-statutory concession A11 (which treats taxpayers that arrive part way through a tax year as resident from the point residence is established rather than for the whole of the tax year) they brought up in correspondence with the individual the possibility that the concession would not be available if he refused to accept that residence commenced in July.
The case, and HMRC’s approach, demonstrates that taxpayers cannot take the concession for granted and must think very carefully about making “scouting” trips to the UK prior to establishing residence.