UK couple face £600k tax bill over residency status

A wealthy couple from Cheshire who left the UK for a new life abroad more than a decade ago have lost an appeal at the First Tier Tax (FTT) tribunal over their residency status, and now face a £600,000 bill for capital gains tax and income tax.

Stephen and Pauline Rumbelow, multimillionaires who owned a grade 1 listed mansion and made a fortune in a property development and leisure business, left the country in 2001, living initially in Belgium. They subsequently moved to Portugal where they built a home, called 'Villa Rumba', but continued to make frequent visits to the UK to see their children, receive medical treatment and oversee the sale of property and land associated with their previous business.

However, HMRC refused to accept that they were resident abroad in the tax years 2001-2005 and challenged the couple's self assessment tax returns for the period on that basis.

The Rumbelow's appealed against this decision, saying they had only returned to England as visitors to see friends and family, and never for more than the 90 days a year. At the tribunal, the couple said the HMRC officer assigned to their case had 'waged a campaign against them'.

However, the FTT dismissed their claims. Judge Cannan said: 'It is clear that Mr Rumbelow was deeply suspicious of the Inland Revenue and HMRC in his dealings with them. To some extent this manifested itself in what HMRC viewed as a lack of co-operation in the enquiry into his residency status.'

The tribunal noted that the Rumbelows did not keep paperwork indicating the dates when they visited the UK, nor did they have written evidence of advice they allegedly received from the firm Arthur Andersen when they were first planning to move abroad.

The Rumbelow's youngest daughter was 15 when they left the country and stayed in the UK rather than go to Portugal. Mr Rumbelow had continued to be closely involved in winding down the couple's businesses, and his wife's name had remained listed as the licensee of one of their leisure outlets for a period after her departure for Portugal.

Noting the couple's close family links to their UK home , the judge said they had never sold their main property which he said had 'remained, essentially, a family home', and were 'not merely travellers' when they stayed there.

As a result, the FTT ruled that while the couple had demonstrated some 'loosening' of their social and family bonds with the UK it was not 'substantial' enough to make them non-UK residents. The £600,000 tax liability they now face is based on disputed income tax and capital gains tax from the years 2001 to 2005 for both Mr and Mrs Rumbelow.

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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