Taxpayers regarded as UK resident as “centre of gravity and life interests” remained in the UK.

This case concerns the UK residence rules and the guidance issued by Revenue (known as IR20) which set out the circumstances in which an individual would, or would not, be treated as resident in the UK.

An application for judicial review was brought by Robert Gaines-Coopers (“Gaines-Cooper”) together with two similar applications by Robert Davies (“Davies”) and Michael James (“James”) to the High Court of Justice.

Issue

The taxpayers all contended that Revenue had failed to interpret IR20 correctly and had unlawfully refused to apply it. The application for judicial review raised the question of the status and interpretation of IR20.

Facts

Davies and James

In November 2006, Revenue determined that Davies and James were ordinarily-resident in the UK for the tax year 2001/02. However Davies and James asserted that in accordance with section 2.2 of IR20 they were entitled to be treated as non-resident and not ordinarily resident as they left the UK for full time employment in Belgium in March 2001. Alternatively, they were entitled to such treatment by virtue of section 2.7–2.9 of IR20 because they left the UK indefinitely, for a settled purpose.

Gaines-Cooper

In October 2006, the Special Commissioners held that Gaines-Cooper remained UK resident for the years of assessment 1993/94 -2003/04 despite his claims that he was resident in the Seychelles. Gaines-Cooper did not appeal the decision of the Special Commissioner. However relying on the line adopted by Revenue in the Davies/James appeal, Gaines-Cooper claimed that such a determination in the case did not prevent the expectation that IR20 would apply to him and it gave a binding assurance that he would be treated as not resident and not ordinarily resident since 1976 despite the conclusion of the Special Commissioners.

The taxpayers all contended that it was not until 2004/05 that Revenue sought to require taxpayers to demonstrate that they had made a distinct break from ties in the UK in order to establish that they had left permanently or indefinitely. This change in policy applied to the taxpayers after they had left and breached their legitimate expectation that Revenue would apply IR20 as they had in the past until it publicly announced that it proposed to change its practice for the future.

Decision

The appeals failed on the grounds that considering the proper interpretation of IR20, the taxpayers fell outside the circumstances which would have gained them non-resident status. The Court held that the facts did not show that Revenue altered its interpretation and application of IR20 to the taxpayer's cases. Accordingly, the Court dismissed the appeals of Davies and James and also found that as the finding of fact were against Gaines-Cooper; his appeal must also be dismissed.

The full case can be downloaded from http://www.bailii.org/ew/cases/EWCA/Civ/2010/83.html