UK Court Hears Key Tax Residency Challenge

by Robin Pilgrim, LawAndTax-News.com, London

08 October 2008

A multi-million pound entrepreneur has launched his legal bid to overturn a ruling that he is still effectively tied to the UK for tax purposes despite having left the country some thirty years ago.

In a case that could have serious implications for the UK's tax residency rules, Robert Gaines-Cooper, a high-flying businessman, claims that he gave up full-time residency in the UK during the 1970s, instead setting up his permanent domicile in the Seychelles.

Gaines-Cooper has been locked in a long-running battle with the tax authorities, which argue that he cannot not be considered non-domiciled because he has maintained strong links with the UK, for example, by schooling his son in the country, and pursuing business and leisure interests there.

HM Revenue and Customs has revoked Gaines-Coopers' non-dom status, and initially demanded he make a back payment of GBP30m for taxes incurred in the time of his supposed non-residency, although this was subsequently reduced to GBP637,500 in a settlement with HMRC.

Mr Gaines-Cooper, who began his career running a jukebox business in the late 1950s, contends that he has been careful never to breach the UK's 90-day residency test, and that he does in fact spend the majority of his time in the Seychelles with his wife and son.

However, ruling in the High Court in November 2007, Mr Justice Lewison said that it was "impossible to say that the only true and reasonable conclusion was that Mr Gaines-Cooper acquired a domicile of choice in the Seychelles in 1976." In doing so he upheld a previous decision by the Special Commissioners.

The case is potentially bad news for British-born expats who are attempting to claim domicile in a new country, illustrating how difficult it can be to sever ties with the country of one's birth.

Following the recent two-day hearing Mr Justice Lloyd said that he was reserving his judgment until a later, unspecified, date.

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