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Non-Resident for Tax Purposes? It’s Not Just a Matter of Physical Absence!

Proving that you are not a UK resident for tax purposes can be a tricky business and many people have mistakenly believed that all they need to do is to keep the number of days they spend in Britain down to fewer than 91 in any one tax year.

The falsity of that assumption was revealed by one case in which a businessman received a £5.5 million Income Tax demand despite insisting that he had moved to Monaco and spent all but 65 days of the relevant tax year outside the UK.

The businessman, aged in his sixties, had received a £24.59 million dividend on the sale of his family property business. He claimed to have made his home in Monaco, but HM Revenue and Customs (HMRC) insisted that he had not broken his business, social and family links with Britain.

HMRC pointed out that, during the tax year in which he received the dividend, he made 22 trips to Britain, always staying at his family home in London. His visits were variously for weddings, funerals, birthdays, charity events, Jewish festivals or to enjoy traditional Friday night suppers with his wife and children.

The businessman won the debate before the First-tier Tribunal (FTT). In overturning that decision, however, the Upper Tribunal noted that it was entirely possible for an individual to have more than one country of residence. The FTT had taken irrelevant factors into account when ruling that he had made a distinct break with Britain.

The fact that the businessman had carefully metered the time he spent in the UK and felt downright misled by the 91-day guideline, which was normally applied when assessing claims to non-resident status, could not be decisive. In those circumstances, the case was sent back to a freshly constituted FTT for reconsideration.