A special commissioner decided that a taxpayer was not resident nor ordinarily resident in the UK since, on the facts, he was in the UK for temporary and occasional purposes only in order to carry out his employment duties.

Facts

The taxpayer was a British Airways pilot and received income from that employment which was paid into his bank in the UK. He was born in South Africa and regarded himself as domiciled in South Africa. He travelled on a British Overseas Citizens passport which he renewed in October 1998. The taxpayer had been living in the UK since 1986. He had purchased a house in South Africa in 1997 but retained a house in the UK for use before and after flights. He appealed against a notice of determination that he was ordinarily resident in the UK for the six years from 1997-98 to 2002-03.

The taxpayer claimed that he had departed from the UK in 1997 to live outside the UK permanently and that thereafter he was not resident in the UK. He had removed the centre of his life to South Africa in 1997 since when he had kept his visits to the UK to a minimum. He had relatives in South Africa. His former wife lived in the UK with their children but he saw them very rarely. He kept private aeroplanes in South Africa and did no private flying in the UK. He had retained a house in the UK as an investment but could have stayed in hotels. He did not agree that the South African house was in the nature of a holiday home and argued that ICTA 1988, s. 334 did not apply because he was in the UK for a temporary purpose only to rest before or after his flights. His visits to the UK were short and only on three occasions were they longer than seven days. He argued that he was a temporary resident in the UK within the meaning of s. 336 and that he had not spent more than six months in aggregate in the UK during any of the years in question.

The Revenue argued that the taxpayer was resident in the UK. The word ‘resident’ was not defined in ICTA 1988 and should be given its natural and ordinary meaning. It was necessary to take into account all the facts of the case. The fact that an individual also had a home elsewhere was not conclusive as a person could reside in two places but if one was the UK then he was chargeable to tax in the UK. There was a difference between the case where a British subject had a residence in the UK and absences from it and a case where the person never had a residence in the UK. Absences abroad caused by employment were temporary absences and did not necessarily mean that a person was not residing in the UK. Further, the taxpayer was ordinarily resident in the UK. Ordinary residence required more than mere residence and meant ‘normal and part of everyday life’. The taxpayer was a Commonwealth citizen who had been ordinarily resident in the UK and s. 334 applied. He was not a temporary resident in the UK within the meaning of s. 336. With regard to s. 336(2), the taxpayer was not in the UK for a temporary purpose only and had the intention of establishing his residence in the UK. He had established his residence in the UK and maintained it and was in the UK regularly and repeatedly for the settled purpose of earning his living. The fact that the time spent by the taxpayer in the UK was relatively short had to be considered within the context of the fact that he spent much of his time in the air.

Issue

Whether the taxpayer was resident and ordinarily resident in the UK in the six years from 1997–98 to 2002–03 inclusive.

Decision

The special commissioner (Dr Nuala Brice) (allowing the appeal) said that, whether the taxpayer was resident and ordinarily resident in the UK in the years in question were matters of fact and degree.

Residence

On the evidence the pattern of the taxpayer's life after 1 September 1997 was that the long haul flights he made would last about four or five days. For two or three days before or after each flight he would stay in the UK. He piloted a number of flights to and from Cape Town. In addition there were regular breaks of 13 to 15 days which were spent in Cape Town. The time spent in the UK was time either before or after a flight, or time when the taxpayer was sick, but most of the other time not spent in the air was spent in Cape Town.

Taking into consideration all the evidence before the tribunal, and the facts found, especially having regard to the taxpayer's past and present habits of life, the reasons for his visits to and the temporary nature of his ties with the UK, the more permanent nature of his ties with South Africa, and the distinct break made in 1997, the conclusion was that from September 1997 he ceased to be resident and ordinarily resident in the UK. After that date the UK was not where he dwelt permanently nor where he had his settled or usual abode which was in South Africa. Residence in the UK did not have a settled purpose and the taxpayer was not ordinarily resident (Levene v IR Commrs (1928) 13 TC 486 considered). IR Commrs v Combe (1932) 17 TC 405 was authority for the principle that, if a person resident in the UK left for another country, and if there was a ‘distinct break’, then even if he returned for lengthy visits, he need not be resident if he had a settled mode of life elsewhere. Applying that principle to the facts of the present appeal, although the taxpayer was resident in the UK before 1997, in that year there was a distinct break and since then his settled mode of life had been in South Africa. In 1997 he set up home in South Africa and purchased a house there. The home was near his parents and brother. He was very attached to his private aeroplanes and it was significant that they were all in Cape Town and that there were none in the UK. He intended not to return to the UK when he retired. Since 1997 he had returned to the UK only for the purpose of his employment. Accordingly, in the light of the principles established by the authorities, the taxpayer was not resident in the UK.

Ordinary residence

The question then was whether the taxpayer was ordinarily resident in the UK. The authorities established the principle that ordinary residence meant part of the regular order of a man's life, adopted voluntarily and for settled purposes. Also, if an individual was not resident in the UK, then it was difficult to find that he was ordinarily resident. In all the circumstances, the taxpayer was not ordinarily resident in the UK (Levene v IR Commrs (1928) 13 TC 486, Lysaght v IR Commrs (1928) 13 TC 511 and Reed (HMIT) v Clark [1985] BTC 224 considered).

Section 334

It was accepted that the taxpayer was a Commonwealth citizen. The relevance of ICTA 1988, s. 334 was that, as the taxpayer's ordinary residence was in the UK before September 1997 he remained liable to tax if his presence abroad after that date was for the purpose of occasional residence abroad. However, his presence abroad after that date was not for the purpose only of occasional residence abroad but for the purposes of continuous and settled residence in his house in Cape Town punctuated only by the need to visit the UK for the purposes of his work. Therefore s. 334 did not apply to the taxpayer.

Section 336

Section 336 could be contrasted with s. 334. Section 334 applied where a person was resident in the UK and made occasional visits abroad; section 336 applied where a person who was not resident in the UK came to the UK for occasional visits. The relevance of s. 336 was that if, after September 1997, the taxpayer was in the UK for some temporary purpose only and not with the intention of establishing his residence, then he would not be treated as resident as he did not in the aggregate spend at least six months in the UK; the question whether he was in the UK for a temporary purpose was to be decided without regard to any living accommodation he had available in the UK. Leaving aside the availability of living accommodation, all the factors pointed to the conclusion that after September 1997 the taxpayer was in the UK for temporary and occasional purposes only. He was in the UK in order to do his work and for no other reason. He had no intention of establishing his residence and his intention was to establish his residence in South Africa. Thus s. 336 applied to the taxpayer so that he was not to be treated as resident in the UK.

(2008) Sp C 663.

Decision released 29 January 2008.