UT/2023/000012 - [2024] UKUT 00280 (TCC)

Mr McCabe is the founder and chief executive of the Scarborough Property Group Plc (Scarborough), a successful property development, property investment and leisure organisation with operations throughout the UK. Scarborough’s business evolved from being primarily UK based into a more international operation, as Mr McCabe began in the early 2000s to seek growth opportunities in mainland Europe and the Far East.

The most significant developments in this regard were (i) the acquisition by Teesland Development Company Ltd (a London listed company chaired by Mr McCabe and in which Scarborough held a significant interest) of IO Group, a property fund management company with a network of European offices; and (ii) the establishment of Scarborough Continental Partners, a joint venture between Scarborough and Bank of Scotland, with the purpose of acquiring real estate assets in mainland Europe.

Mr McCabe decided that he needed to move to Brussels to develop and grow the European business. His move to Brussels was also part of a tax planning strategy intended to ensure that he was not charged to capital gains tax (CGT) under s. 10A of The Taxation of Chargeable Gains Act 1992 on the gain arising on the disposal of shares in Scarborough. S.10A required him to be non-resident for at least five full tax years. He sought tax advice from several sources in order to plan the steps needed to ensure that he could arrange his relocation in a manner sufficient to make him non-resident.

Mr McCabe left his family house at 13 Deepdale Avenue in Scarborough (Deepdale) (which had been in his wife’s sole ownership since 2004), and moved to Brussels on 4 April 2006. Over the course of the next seven years he rented or bought living and office accommodation in Brussels, and incorporated a Belgian personal service company Scarborough Realty (Europe) SPRL (SRE), through which he entered into various paid consultancy agreements with Scarborough group members. Mr and Mrs McCabe remained married and spent considerable time together during the Relevant Period, but Mr McCabe’s move to Belgium was inevitably reflected in significant changes to his social and business arrangements.

The FTT made detailed factual findings in respect of the practical arrangements that Mr McCabe made in advance of his move to Brussels, and his activities and movements over the Relevant Period.

On 9 July 2007 Mr McCabe sold most of his interest in Scarborough to an Australian listed property group (Valad Property Group) in return for loan notes and equity in the acquiring companies. He also became a non-executive director of certain Valad group companies. He then transferred his remaining ordinary shares in Scarborough to his sons for no consideration on 3 April 2008.

Mr McCabe’s self-assessment tax returns for the Relevant Period, which included the disposals of his interests in Scarborough, were prepared on the basis that he was not UK resident (or ordinarily resident) during that period. Those returns were amended by the disputed closure notices, on the basis that HMRC considered Mr McCabe to have been resident in the UK during the Relevant Period.

It is common ground that Mr McCabe was UK resident from 3 May 2013.