Gaines-Cooper loses appeal over UK residency

In a dispute stretching back almost two decades and with an estimated £30 million tax bill at stake, the Supreme Court has dismissed Robert Gaines-Cooper’s appeal, in which he claimed he had a “legitimate expectation” to rely on HMRC’s guidance (formerly IR20 and replaced by HMRC6) to determine his UK residency status. 

Gaines-Cooper, a British citizen, has been embroiled in a dispute with HMRC since 1998 over whether or not he is UK resident. He began establishing overseas interests in 1974, first in Canada and then in the Seychelles, and was very careful never to stay in the UK for more than 91 days in any given year, a widely accepted measure of UK residence. However, the Supreme Court has concluded that the requirements of IR20 demanded an overall evaluation of the circumstances; the need for a “distinct break” from the UK, a well-established principle in case law, was also necessary but had not been satisfied by Gaines-Cooper. HMRC’s guidance was specifically expressed to be “general guidance only” as stated in the IR20 booklet and should therefore have been read in conjunction with case law.

The case has no doubt served as a catalyst for the introduction of a statutory residence test (due in April 2012) by highlighting widespread uncertainty over current UK residence rules which by the Supreme Court’s own admission are “very poorly drafted” and “should have been much clearer”. Although the importance of this case will diminish over time with the new statutory test, individuals will nevertheless need to apply caution when relying on HMRC’s guidance.