UK and International Tax news

Residence Case – Tribunal Update

Tuesday 22nd February 2011

Following the Court of Appeal decision in October 2009 in the case of CIR v Lyle Dicker Grace [EWHC 2708], the FTT has recently issued its decision in respect of that remittance and held that Mr Grace never ceased to be resident in the UK.

As summarised in our UK Tax News item of 27 November 2008, the taxpayer was an airline pilot who worked for British Airways.  He piloted long haul flights between the UK (from either Gatwick or Heathrow) to South Africa and elsewhere.  He had a home in Cape Town.  He was assessed to income tax under s.19 (1)TA88 for the years 1997/8 to 2002/3 on the ground that during those years he was resident and ordinarily resident in the UK.  He appealed against that assessment.  On 29 January 2008, the Special Commissioner (Dr Nuala Brice) allowed his appeal.  She held that the taxpayer was neither resident nor ordinarily resident in the UK during the years of assessment.  

The appeal was heard and upheld by Lewison J on 4 November 2008.  The taxpayer was held to have been both resident and ordinarily resident in the UK throughout.  In arriving at his judgement, Mr Justice Lewison criticised the Special Commissioner’s judgement in a number of respects saying that she had made a number of errors in law.

Mr Grace appealed this decision which was heard on 5 October 2009 and the Court of Appeal released its decision on 28 October 2009:  Grace v HMRC [2009] EWCA Civ 1082. The decision was unanimous, with Lloyd LJ concluding that the Special Commissioner had mis-directed herself but did not agree with Lewison J that there was only one possible conclusion to the question of residence based on the primary facts as found at first instance. The Court of Appeal therefore remitted the case to the FTT, which had by then replaced the Special Commissioners.

The Tribunal Judge, Barbara Mosedale, considered that although the time Mr Grace spent in the UK was a little less than half the time before September 1997, she found this not to be enough to amount to a definite break with the UK.  Whilst he did create new ties elsewhere, he did not sever his main ties (employment and house) with the UK.  Taking into account all factors, but giving greatest weight to his employment and home here in the UK and the amount of time actually spent here together with the frequency of his short visits, the Judge stated she was in agreement with Lewison J that in September 1997 Mr Grace went from being a person resident in one country to being a person resident in two.  She concluded that Mr Grace was resident in the UK for the six years in issue (1997-2003) and it followed that Mr Grace did have a settled purpose to his residence in the UK and that he was also ordinarily resident here.

If you would like to discuss the implications of this case in more detail, please contact Keith Rushen on +44 (0)20 7486 2378

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