Residence

The Tribunal was not concerned with whether the taxpayer became resident in the Netherlands but whether the change in his circumstances was sufficient to demonstrate that he had ceased to be resident in the UK.

Considering section 334 ICTA 1988, the Tribunal was not satisfied that the taxpayer's move to the Netherlands amounted to anything more than occa-sional residence abroad. As a result of the ‘“occa-sional” nature of his residence in the Netherlands, section 334 rendered him liable to assessment and charge to income tax. However the Tribunal recognized that section 334 does not extend to capital gains tax, section 9(1) TCGA 1992 simply adopts, for capital gains tax purposes, the meanings which the expres-sions “resident” and “ordinarily resident” have in the Income Tax Acts. As the assessment in this case related to capital gains tax, the chargeability depended on the presence or absence of residence and/or ordinary residence examined under common law principals. Drawing from decision reached by Lord President in Cadwalader (5 TC 101 at 106), the Tribunal concluded that the pattern of the taxpayer's visits to the UK during 1998/99 together with the fact that his wife continued to reside in the UK was sufficient to demonstrate that he remained resident in the UK in 1998/99.

Ordinarily Residence

In the same way as for residence, the question for the Tribunal was not whether the taxpayer became ordinarily resident in the Netherlands for 1998/99 but whether the change in circumstances was sufficient to demonstrate that he had ceased to be ordinarily resi-dent in the UK. In reaching a decision on residence, the Tribunal had found that the taxpayer's residence in the Netherland was “occasional” in nature and drawing from the decision in the Lysaght case, such occasional residence elsewhere was not sufficient to demonstrate a change in “..the regular order of a man's life, adopted voluntarily and for settled purposes” (13 TC 511 at 528).

Resident in the Netherland for the Purpose of the Treaty

Having decided that the taxpayer was ordinary resident in the UK in 1998/99, the Tribunal had to consider if he was resident in the UK or Netherlands for the purpose of the double taxation agreement. The capital gain was made in March 1999 which fell within the UK 1998/99 tax year and the Dutch 1999 tax year.

Applying the tests laid down in art. 4 of the Treaty, the taxpayer was resident in the UK at the time of the capital gain. If he had been resident in both states, under the dual residence provisons of the Treaty, he would have been considered resident in the UK.

Validity of the Discovery Assessment

HMRC issued a “discovery” assessment in 2004/05 as a result of newly discovered material in the form of information not made available in the taxpayer's 1998/99 tax return. The Tribunal found that the Revenue officer did have evidential basis beyond mere suspicion in order to arrive honestly at the conclusion that, on balance, there was an insufficiency. The Tribunal concluded that the officer was entitled to made the discovery assessment under section 29TMA 1970 and therefore the discovery assessment was valid.

The full text of the judgement is available at http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=4681