Property developer wins £5.5m non residency appeal

A wealthy property developer who declared himself non resident by moving to Monaco has won his appeal against a claim by HMRC that he was liable for £5.5m of income tax since his regular trips back to London for family celebrations meant he had not renounced living in the UK.

The First Tier Tax (FTT) tribunal ruled that James Glyn did effect a distinct break when he left his house in St John's Wood in London and moved to a flat in Monaco in 2005.

Shortly after leaving, Glyn received a £29m dividend paid out from the sale of the family property business he ran with his brother, which would have been subject to £5.5m in tax had he remained a UK resident.

The tribunal stated that 'the battle lines between the parties' were drawn up over the issue of Glyn's trips back to London in 2005, which were timed to coincide with family celebrations and traditional Jewish festivals and Friday night suppers held at the St John's Wood property.

HMRC argued that these visits meant Glyn had not cut either his family or business ties with his home country. But judge Howard Nowlan challenged HMRC's view that the family dinners and attendance at the three main Jewish festivals during the year ranked as 'settled purpose', saying this was 'both unrealistic and almost offensive'.

Judge Nowlan said: 'Surely it must follow as a matter of common sense that if a person has left the UK, and he then makes periodic visits back to the UK those visits are likely to be for some special event or some purpose that is of some significance to him. It cannot be envisaged that the person making the visits must make them for some purpose that he considers trivial and incidental.'

The tribunal also heard that Glyn and his wife took frequent long-haul holidays, choosing routes via Heathrow. Sometimes they stayed at the house and attended meetings with accountants BDO.

However the judge said that the evidence presented by Glyn, which he described as 'meticulous and organised' clearly showed that he saw Monaco as his home base in retirement. He pointed out that the meetings with BDO were to receive updates on a possible challenge by HMRC to the sort of capital loss scheme which the family had used to reduce the corporation tax due on the sale of their property portfolio, rather than to seek advice about active management of the business.

The judge said that Glyn's declared intention in going to Monaco was to retire from what he called the 'drudgery' of running a business and to effect a change of lifestyle. The fact that he had taken up walking and a keep fit regime while living there, which resulted in his losing two stone in weight and being free from migraines for the first time in his life, was evidence of this change in approach.

The FTT tribunal therefore ruled that Glyn 'did effect a distinct break; he did significantly loosen his family and social ties; he severed and abandoned his former business life almost completely, and he had no "habitual abode", or "abode for a settled purpose" in the UK.'

The judge was also critical of the guidance provided in HMRC's publication IR20 as 'hopelessly misleading'.

Judge Nowlan said: 'It is worth noting that that publication not only failed to mention the non-day count requirements for showing that a person had "left" the UK, but it also plainly indicated that return visits could aggregate an average of 90 days a year, that days of arrival and departure should be ignored in calculating days of presence, and there was certainly no reference to the fact that visits should be shown to be for only very limited purposes.'

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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