When you are asked “where do you come from?” what do you say?
I was asked this when on holiday in Canada, and I caused great amusement (except from my son who threatened to disown me) when I proudly replied “Yorkshire”.
UK Tax law has different rules depending on an individual’s tax status and therefore it is important to know where you are from. Somewhat surprisingly though, there are no hard and fast rules to define residency for tax purposes and this has led to a great deal of uncertainty in the past when advising clients who are leaving the UK.
Many years ago HMRC produced a guideline that was widely assumed to be definitive but in recent times this was brought into some doubt when HMRC took a couple of tax cases to the (then) General Commissioners.
In one particular case, the entrepreneur Robert Gaines-Cooper was claiming that he was non-resident in the UK, as he was spending less than 90 days a year, based on the rules outlined in the HMRC’s guidelines. An estimated £30m was reported to be at stake.
Recently however, it was reported that he has lost his appeal in the Supreme Court, in a dispute stretching back almost 20 years. The Court judged that the IR20 guidance was not binding and should not be seen as deterministic in cases of residency. Furthermore, it is thought that the government is set to introduce a Statutory Residence Test in April next year.
In effect, the much reported 90-day rule has no credibility any more and great care has to be taken to make sure that anyone who comes to the UK, leaves the UK or travels to and from the UK, knows what the rules now are, to define to what extent they are caught by UK tax legislation.
So until the Yorkshire Liberation Front, (or should that be the Liberation Front of Yorkshire?), come into power, I am a UK resident for tax purposes.
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