RSS feedsWe all know that the chancellor needs to raise more money and it is no secret that he is suspicious of those who seek to use the rules on residence and domicile to their advantage. That is why the Treasury issued a consultative document on the subject as part of the 2003 Budget.
What I find wholly unacceptable is when the Treasury/HM Revenue & Customs attempt to move the goal posts without prior notice. We had one example of this with the Arctic Systems case and another with the changes in this year’s Finance Act on the tax treatment of trusts.
With the special commissioners’ decision on Gaines-Cooper versus HMRC we have yet another attempt to change the rules by stealth. Robert Gaines-Cooper is an international business man spending much of his time overseas. His family are based in the UK, however, and not surprisingly he is a frequent visitor. He organised his affairs to be in the UK less than 91 days each tax year on average, thereby retaining a non resident status.
The special commissioners decided that this was not the correct test to apply and that it should be based on the number of nights in the UK. They have the authority to make decisions of this nature and I have no difficulty with them interpreting the law as they see fit. What I find unacceptable, however, is that it was Revenue Counsel who put forward the proposal that this was the correct test to apply.
This was presumably with the full authority of HMRC, despite the fact that it was in direct contradiction to their own stated guidance. Taxpayers have a right to be treated fairly.
IR20 is issued by HMRC as guidance to taxpayers and their advisers based on their interpretation of the law. To date, statements made by HMRC have been accepted in good faith by taxpayers. It now seems that they are happy to discard their own guidance when it no longer suits their purpose.
The advice must now be to play safe in calculating the days spent in the UK, but the real issue is the extent to which future statements can be trusted. I realise that IR20 refers to the ‘normal rule’, but there is nothing particularly unusual about the Gaines-Cooper case that would cause the stated practice to be set aside. We need a clear statement from the Treasury of its policy on statements of practice so that trust can be re-established.
Mike Warburton is senior tax partner at Grant Thornton
