Tax exiles face HMRC onslaught

Posted: 20th October 2011

The Supreme Court has handed down its decision in Gaines-Cooper. The case involves a businessman who has been defending his right to be treated as a non-resident for UK tax purposes on the basis that he followed HM Revenue and Customs' (HMRC) guidance on residence for many years.

Palm Tree
Mr Gaines-Cooper organised his affairs so that he complied with the HMRC guidance, contained in their leaflet IR20, to make himself non-resident for UK tax. However, HMRC decided that its previous guidance was not correct and that Mr Gaines-Cooper's connections with the UK were too strong for him to be treated as non-resident. He was therefore considered to be assessable to tax for the years during which he claimed he was not resident in the UK and was not therefore taxable.
In essence, HMRC have been successful in persuading the Court that where they issue guidance to taxpayers, designed to provide certainty to them in understanding how their tax affairs will be dealt with, and subsequently decide that the guidance was incorrect or incomplete, they may 'move the goalposts'.
This decision will have a severe impact on many people who think they have achieved non-resident status but have maintained links with the UK. In addition, the decision may tempt HMRC to reconsider the 'correctness' of their guidance in other areas where a change in policy may yield significant amounts of tax.