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Hard-Working Couple Face £600,000 Tax Demands

villaA hard-working couple are facing retrospective tax demands totalling almost £600,000 after failing to persuade the First-tier Tribunal that they abandoned their UK residence when they departed to the continent in search of an easier life.

The middle-aged couple had, from lowly beginnings, established a highly successful network of businesses involved in building, plant hire, property development and the use of a Grade I listed mansion as a restaurant and conference facility.

The wife had suffered a breakdown due to over-work and that was the trigger for their decision to ‘tidy up’ their business affairs, escape the stress of it all and make a new life for themselves on the continent. They had built a villa in Portugal for themselves after departing through the Channel Tunnel in 2001.

However, their hopes of a relaxed retirement in the sunshine were dashed when HM Revenue and Customs (HMRC) issued them with swingeing tax demands after refusing to accept that they had been non-UK residents in the tax years 2001-2005, during which some major asset dispositions had been made.

The couple insisted that they had intended to make their lives permanently abroad. After years of intensely hard work, they had wanted to retire and hoped that the move would benefit the wife’s health as well as improving their quality of life. They said they had only since returned to England as visitors – and never for more than 90 days a year, the threshold then applied by HMRC for overseas residence.

However, in dismissing the couple’s appeal, the Tribunal found that their departure in 2001 had not marked ‘a distinct break’ with the UK. Their youngest daughter, who was only 15 at the time, had remained in England and they had never sold their house in the UK, which they had continued to view as a family home.

Noting that the residency test was ‘qualitative rather than quantitative’, the Tribunal found that the couple were ‘not merely travellers’ during their frequent trips back to England. The husband had remained closely involved in winding down the couple’s businesses and, although there had been some ‘loosening’ of their social and family bonds with England, it was not ‘substantial’ enough to render them non-UK residents.