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Peripatetic Businessman ‘Ordinarily Resident’ in the UK

Many businesspeople lead peripatetic lives of constant international travel and the crucial question of whether they are settled in the UK for tax purposes can be very difficult to answer. A First-tier Tribunal (FTT) ruling, however, revealed the lengths to which HM Revenue and Customs (HMRC) will go to establish that a taxpayer is ordinarily resident in this country.

The case concerned the tax treatment of £578,400 received by an overseas national on the severance of an employment contract. He claimed that, by virtue of Section 414 of the Income Tax (Earnings and Pensions) Act 2003, he was entitled to foreign service relief in respect of £252,923 of that sum. HMRC disputed his claim. The amount of tax at stake was £114,458.

The case hinged on whether he was ordinarily resident in the UK during the period of 40 months to which his claim for relief related. He accepted that he was resident in the UK for much of that period, but denied that he was ordinarily so. He asserted, amongst other things, that he lived for long periods out of a suitcase and that he spent roughly 70 per cent of his time working abroad.

Rejecting his appeal, however, the FTT found him an unreliable witness. His bank and credit card statements – which detailed payments for, amongst other things, haircuts, dining out and having his shirts ironed – placed him regularly and habitually in the UK during the relevant period. On an ordinary day during that period, he would usually have been found either working in London, at home with his family in Kent or otherwise at leisure in the UK.

At the beginning of the period, he had voluntarily adopted the UK as his abode for the settled purposes of his work and promoting his family life. The FTT found on the evidence that he was present in the UK for 34 of the relevant 40 months. His absences abroad were of a temporary nature and he had been ordinarily resident in this country throughout the relevant period.