Temporary visits to the United Kingdom

The tests for determining tax residence

One of the tests applied by the U.K. tax authorities in deciding whether an individual is resident for tax purposes is the 90 day rule. A person is treated as resident if he or she is present in the U.K. for an average of ninety days or more in any period of four years. The days of arrival and departure are excluded from the calculation.

In a recent Case however (C.I.R. v. Gaines- Cooper) the Special Commissioners, which is the tribunal which deals with tax appeals, decided not to follow this guidance. Mr. Gaines-Cooper, the taxpayer, had claimed that he had ceased to be UK tax resident and that he had acquired a domicile of choice in the Seychelles. His visits to the UK had averaged fewer than 91 days per annum, and that therefore he was not U.K. resident. He also claimed that over a period of many years he had built up close connections with the Seychelles and that he had abandoned his English domicile. He owned a large property in the Seychelles, had established substantial business interests there and had married a local person.

The decision went against him however as the tribunal decided that he remained UK resident at all material times. Many of his visits to the UK had been very short; sometimes he had arrived on one day and had departed again on the next. When this had happened, the visit should not be ignored but should count as one day, based on nights spent in the UK. On this basis of calculation, his average exceeded 90 days per annum. The tribunal also referred to a particular section of the Taxes Act which states that a Commonwealth or Irish citizen who has left the UK will still be treated as resident if he has left for the purpose of occasional residence abroad. It ruled that this section applied due to Mr. Gaines-Cooper's frequent return visits and ongoing UK connections.

On the matter of domicile, the tribunal stated that, for Mr. Gaines-Cooper to have acquired a domicile of choice in the Seychelles, there must be conclusive evidence that he had abandoned his domicile of origin in England. He had retained a residence in England which he visited frequently and he had family and friends there. The conclusive evidence did not exist and therefore, notwithstanding his property and interests in the Seychelles, he remained domiciled in England.

This case has, naturally attracted the attention of tax practitioners and their clients and as a result the U.K. Revenue Authority has issued a statement which confirms that there has been no change in its practice. In the particular case of Mr. Gains-Cooper, it would have been misleading to ignore his days of arrival and departure.

As a result of this decision persons who have emigrated from the U.K. but who continue to make visits and to hold assets there should review their affairs and assure themselves that they comply strictly with the rules. Non-U.K. citizens who make frequent visits will also need to be sure that on an application of these rules, they will not be classed as resident for tax purposes in the U.K.

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