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Non-UK Residency - Tribunal Relieves Taxpayer of £3 Million Tax Demand
Claims to non-UK residency for tax purposes are a political and fiscal hot potato and HM Revenue and Customs (HMRC) are, to say the least, reluctant to accept them. In an exceptional case, however, the First-tier Tribunal (FTT) backed a hard-pressed taxpayer and relieved her of a seven-figure tax demand.
The woman relocated from the UK to Ireland before receiving a dividend on shares of about £8 million. HMRC refused to accept that she was a non-UK resident during the relevant tax year and amended her self-assessment tax return so that it showed additional tax due in excess of £3 million.
She was aware that, in order to qualify for non-UK resident status, she was only permitted to be present in this country for 45 additional days during the tax year concerned. She had exceeded that allotment by a few days, but asserted that she had only done so in order to deal with an unforeseen family crisis.
In upholding her appeal, the FTT noted that she had strayed beyond the 45-day limit after travelling to the UK twice during the relevant period in order to provide care for her twin sister, who was suffering from alcoholism, and her two children. Although she was under no legal obligation to provide such care, the circumstances were exceptional and the FTT ruled that the excess days she spent in this country should therefore be disregarded.
The FTT rejected HMRC's argument that the exceptional circumstances exemption contained in the Finance Act 2013 does not apply to taxpayers who come to the UK under a moral, rather than legal, obligation. It also found that the exemption does not apply exclusively to taxpayers who are already in the UK when overtaken by events that prevent them from leaving. In both respects, the FTT found that there was no justification for such a restrictive reading of the statutory language.
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