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Home away from home


HEY SAY that home is wherever you lay your hat. But rolling stones had best beware – if you pop your headgear down for too long, you shouldn’t be surprised when some

official slaps your bare bonce with a hefty tax bill. In June, the UK Government launched its consultation on changes to the country’s residency laws, sparking fears that such interventions are set to become even more likely. Concern centred on a rumoured 10-day rule, which many worried would set an impossibly low limit on the amount of time one could spend working in the UK before getting stung for tax. Yet as the dust settles on the consultation, the picture

emerging is very different – the proposed system for defining residency appears far clearer than the current set-up, which will benefit not just the Government’s coffers, but anyone with links to the UK too. In truth, it couldn’t get much more confusing than

the current system. The UK’s definition of residency has always been impossibly blurred, thanks largely to the ad hoc nature of its residency laws, which are built on a century of case law. But if you have ties to the country and are trying to use those previous cases to determine how Her Majesty’s Revenue and Customs will judge your residency status, then good luck – your guess is likely to be as good as anyone’s. Under the current system, individuals are treated

as British residents for tax purposes if they spend 183 days or more in the UK in any tax year, or more than 90 days on average over a period of up to four years. Those looking to give up resident status can move abroad permanently or take a full-time contract overseas. If they keep their visits to the UK within the aforementioned parameters they should avoid getting stung. At least that’s the theory. But try telling that to entrepreneur Robert Gaines-Cooper, who has lived

Proposed changes to UK residency laws look set to make things clearer for everyone involved, despite some mandatory scaremongering, as Dave Waller discovers

in the Seychelles since the 1970s but was hit last year with a £30 million tax bill. The Court of Appeal ruled the Reading-born entrepreneur was liable for UK tax because the UK had remained ‘the centre of gravity of his life and interests’ – his second wife and son had lived for some time on his Henley estate, and the latter went to an English school. The fact that he had not been in the country for more than 90 days in any one year since 1976 apparently made no difference.

Time for change Therein lies the rub – with no strict legal definition for residency, the subjective system is incredibly easy to fall foul of. But what can you expect of a set of laws that date back to the early 20th Century? “Many of these laws were introduced to a world of

trains and steamboats,” says Garry Bell, Tax Director at PricewaterhouseCoopers in Jersey. “The world is much smaller now in terms of communications and transport. There have been more residency disputes in the last 10 years than the previous 60, and that’s symptomatic of vastly changing lifestyles.” The result is a system that no longer works for

anyone involved. Tax advisers are left interpreting the rules cautiously, often limiting clients to conservative advice just to be safe; HMRC is currently spending a huge amount of time, effort and money litigating cases on individual residents; and the UK is losing millions in potential investment every year, with outsiders too uncertain of their standing to bring their business in. And so to the Government’s latest consultation. It

proposes sweeping reforms to the system (see page 20), designed with one thing in mind: clarity. Business people, it says, would be more confident investing in the UK if they were fully aware of their tax status from the start. “It’s hoped that the codification of a set of principles in place of cases and revenue practice

➔ August/September 2011 19

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