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

Ms Shaw said that Mr McCabe did not in fact spend a single night at Deepdale during the Relevant Period, which she said shows that Mr McCabe did not treat it as his home.

Again, however, the relevant question for the purposes of the DTC is whether the taxpayer has a home that is “available” to them, a question which the FTT addressed on the facts before it. That is different from the question of whether the taxpayer in fact spends time sleeping at the property. As the FTT noted at §125(4), although Mr McCabe spent time at Deepdale when he was in Scarborough during the Relevant Period, he did not sleep there for reasons solely attributable to the tax advice he had received. Mrs McCabe would, however, have given permission for Mr McCabe to sleep there if he had asked. On the basis of those findings, we do not consider that the fact that Mr McCabe did not in fact spend any nights at Deepdale undermines the FTT’s finding that Deepdale was a permanent home available to Mr McCabe.

Finally, at the hearing Ms Shaw sought to introduce two German court decisions (concerning, respectively, the Germany/Switzerland and Germany/Spain Double Taxation Agreements) which she said showed that the property should be regularly used by the taxpayer for it to be regarded as a permanent home for the purposes of Article 4(2)(a).

That was a new submission, not mentioned in Ms Shaw’s grounds of appeal or her skeleton argument; nor had it been raised before the FTT. In fact, in the FTT Ms Shaw’s submission was the opposite: the transcript of the hearing records her submission as being that “if a person has arranged a home to be permanently and continuously available for him to stay at, then whether or not he, in fact, stays there is nothing to the point.”

It is well-established that an appellate court should be cautious about allowing a new point to be raised on appeal, and will not generally permit such a new point if it would necessitate new evidence or would have resulted in the trial being conducted differently with regards to the evidence. The decision whether to allow the new point will depend on all of the relevant factors, including the nature of the proceedings which have taken place in the lower court, the nature of the new point, and any prejudice that would be caused to the opposing party if the new point is allowed to be taken: Notting Hill Finance Limited v Sheikh [2019] EWCA Civ 1337, §§25–27.

In the present case the FTT trial took place over 13 days, and involved extensive arguments and a large volume of witness and documentary evidence. While (as we have already noted) the FTT found that Mr McCabe did use Deepdale throughout the Relevant Period, and earlier in its judgment had found that Mr McCabe visited Mrs McCabe at Deepdale on several occasions, including the Christmas periods (§125(2)(b)), the FTT made no specific findings as to the extent of that use, because the question of the extent and regularity of Mr McCabe’s visits to Deepdale had not been raised as a relevant issue for the purposes of Article 4(2)(a) of the DTC. Had the point now raised been before the FTT, it would inevitably have required evidence and argument on this point.

We therefore do not have the evidential material available to us to consider the point now raised by Ms Shaw. Not only that, but the fact that the argument was advanced for the first time at the hearing meant that Mr Stone had not had the opportunity to formulate submissions on the German decisions, which concern different treaties and different fact patterns to those of this appeal. Taking these factors into account, we consider it inappropriate to allow Ms Shaw to introduce a new point of law in relation to interpretation of Article 4(2)(a), on the basis of the German case-law which she referred to at the hearing.

We therefore dismiss this ground of appeal.

The final ground of appeal concerns the application of the second limb of Article 4(2)(a) of the DTC, which provides for an individual with a permanent home available to him in both the UK and Belgium to be resident in “the State with which his personal and economic relations are closer (centre of vital interests)”. In other words, this limb asks where the taxpayer’s COVI is located.

In analysing that question, the FTT started out (at §237) by noting that this limb of Article 4(2)(a) required a comparison between relevant aspects of Mr McCabe’s personal and economic relations in the UK and Belgium during the Relevant Period. It noted that its conclusions on Mr McCabe’s permanent home or habitual abode were not relevant when assessing COVI, as that issue would arise at a separate stage of the Article 4(2) “waterfall”. In addition, the FTT discounted, as irrelevant, the question of the extent of time spent by the McCabe family in La Manga, and a comparison between Mr McCabe’s relations before and during the Relevant Period.

While the FTT accepted that Mr McCabe had various connections to Belgium during that time, it ultimately placed greater weight on his personal and economic relations in the UK (§§238–239). The FTT therefore found that Mr McCabe’s COVI remained in the UK during the Relevant Period.

Ms Shaw’s criticisms of those findings again evolved somewhat between her written submissions and the hearing. By the time of the hearing, we understood her submissions to be that:

We address these in turn.

Ms Shaw made the point that a failure to give reasons or sufficient reasons essential to a decision could constitute a ground of appeal, citing HMRC v Hippodrome Casino [2024] UKUT 27 (TCC). She contended that while the FTT listed various personal and economic connections to both Belgium and the UK, relevant to the assessment of COVI, it did not explain why it gave greater weight to the UK connections.

We do not accept this criticism. At §238 the FTT listed what it considered to be Mr McCabe’s key personal and economic relations with Belgium. It then stated at §239 that having assessed “all of Mr McCabe’s relations” it placed greater weight on his personal and economic relations in the UK. The key factors relied on were then listed at §§239(1) to (5), and we have summarised them at §28(8) above.

It is clear to us that the FTT was, in those paragraphs, setting out the result of its evaluative analysis, recording the key UK connections which it considered to outweigh the Belgian connections which it had also set out. In other words the FTT’s reasoning was that on the basis of the various Belgian and UK connections which it listed, it considered that Mr McCabe’s personal and economic relations with the UK carried most weight in its assessment, leading to the conclusion that Mr McCabe’s COVI was in the UK.

While the FTT’s summaries in paragraphs §§238–239 of the Belgian and UK connections that it considered to be relevant was concise, those paragraphs must be read in the context of the judgment as a whole, in which the FTT had already made very detailed findings on each of the matters set out in those summaries. It was not necessary for the FTT to repeat those findings, extensively, in its discussion on the issue of COVI.

Unlike the comments at §63 of the Hippodrome case, this was therefore not a case where the FTT “failed to give any reasons” for reaching the conclusion that it did, or had simply failed to address with the case advanced by one or other party.

As Ms Shaw’s submissions revealed, her real objection was not to the sufficiency of the reasons given by the FTT, but to the FTT’s evaluation of Mr McCabe’s connections as supporting a finding that Mr McCabe’s COVI was in the UK. Her submissions on that were, however, in reality a challenge to the FTT’s factual assessment and its decision as to the weight to be given to its factual findings, which cannot be pursued save on Edwards v Bairstow grounds. Ultimately, while Ms Shaw took issue with the significance of Mr McCabe’s connections with the UK, she did not suggest that the factors relied upon by the FTT at §239 of the Decision were wholly irrelevant to the FTT’s analysis, or that the FTT’s conclusion was not one that was open to a reasonable tribunal, properly directed as to the law.

For completeness, however, we comment briefly on the points made by Ms Shaw in this regard.

First, Ms Shaw took issue with the FTT’s findings as to the time spent by Mr McCabe in the UK with family and friends. These were, however, findings that were open to the FTT on the evidence before it. The fact that Mr McCabe’s social contacts with UK friends reduced after his move does not undermine that analysis – as we discuss further below, the test does not require a comparison of the situation before and during the Relevant Period, but solely requires analysis of the situation as it stood during the Relevant Period. Ms Shaw also noted that Mr McCabe spent most of his time with his family outside of the UK, primarily at La Manga. Again, as we discuss below, the test does not require consideration of connections to third countries. It was therefore not relevant for the FTT, in this part of its analysis, to take account of the time spent by the McCabe family in La Manga.

Secondly, Ms Shaw said that Mr McCabe’s presence at Sheffield United matches was significantly less than it had been, and that he also pursued sporting interests in Brussels and overseas. Neither of those factors undermine the validity of the FTT’s reliance, for the purposes of its COVI analysis, on the fact that Mr McCabe continued to attend numerous Sheffield United matches in the UK during the Relevant Period.

Thirdly, as regards Mr McCabe’s continued involvement in the Scarborough Group, and his continued conduct of a substantial amount of Scarborough Group business from the UK, Ms Shaw pointed to various factual points which she said should have been regarded as significant by the FTT. The FTT’s finding that Mr McCabe continued to conduct a “substantial” amount of Scarborough Group business from the UK was, however, supported by its detailed findings earlier in the Decision on Mr McCabe’s travel pattern, responsibility for UK businesses and meetings in the UK. Beyond that, the weight given to the various aspects of Mr McCabe’s business activities was a matter for the FTT. We do not accept, in particular, that the FTT ignored the fact that Mr McCabe had sold the majority of his interest in the Scarborough Group to the Australian group Valad. That transaction and its impact on Mr McCabe’s responsibilities was addressed in the earlier detailed discussion in the Decision, which was the basis for the FTT’s COVI analysis.

Fourthly, we do not agree with Ms Shaw’s submission that the source of Mr McCabe’s employment income from SRE (i.e. that it derived from UK companies within the Scarborough Group) was immaterial. The FTT was entitled to take account of the facts as a whole, and the reality that although Mr McCabe had incorporated a Belgian personal service company, that company derived its revenue from consultancy contracts with UK businesses.

Ms Shaw submitted that the DTC tie-breaker is intended to result in clear and unequivocal determinations. She contended that by failing to take into account Mr McCabe’s presence in La Manga with his family, and his income from Australia, the FTT failed to appreciate that Mr McCabe’s COVI could not be determined as between the UK and Belgium.

We do not accept these submissions. At §241 the FTT expressly recognised that if COVI could not be determined it would need to consider where Mr McCabe had his habitual abode. The FTT was well aware, therefore, that a possible outcome of the analysis might be that COVI could not be determined as between the UK and Belgium. Article 4(2)(a) does not, however, require a determination of COVI to be “clear and unequivocal”; rather, the question is simply whether the State of the taxpayer’s COVI can be determined or not. The FTT decided that Mr McCabe’s COVI could be determined as being in the UK, and nothing in the Decision suggests that the FTT’s conclusion in that regard was equivocal or marginal.

As to the factors relevant to that analysis, Article 4(2)(a) requires a determination of “the State with which [the taxpayer’s] personal and economic relations are closer”. That requires a comparative exercise between the two contracting States in which the taxpayer is resident, i.e. Belgium and the UK. The FTT therefore did not err in law by focusing its analysis on a comparison between Mr McCabe’s personal and economic connections in Belgium and the UK. That was the comparison required by the DTC test, and the FTT concluded that Mr McCabe’s personal and economic relations were closer to the UK than to Belgium. The fact that Mr McCabe spent considerable time at the family holiday home in La Manga and received employment income from Australia had no bearing on that analysis.

Ms Shaw’s submission was that the FTT should have taken account of Mr McCabe’s habitual abode in its determination of COVI, since if Mr McCabe had a habitual abode in Belgium, then it was unlikely that his COVI would not also be in Belgium.

We agree with Mr Stone that this submission failed to recognise the “waterfall” structure of Article 4(2) of the DTC. That provision sets out a series of sequential, compartmentalised tests. The question of habitual abode under in Article 4(2)(b) is third in that sequence of tests, and therefore does not arise for consideration unless and until the first two tests have failed to establish the deemed residence of the taxpayer for the purposes of the DTC. Elision of the COVI test with the test for habitual abode would fail to give effect to the priority set out in that waterfall structure.

The FTT did not, therefore, err in law in failing to consider Mr McCabe’s habitual abode in the context of its determination of his COVI. The FTT did, however, properly consider the fact that Mr McCabe had bought an apartment at Avenue Louise in Brussels, in 2007, and that he spent time in Brussels with his family when they visited him there. Those were relevant factors in the FTT’s assessment of Mr McCabe’s personal and economic relations in Belgium, and were taken into account in that assessment. The weight given to those factors in the assessment of COVI, compared with the weight given to Mr McCabe’s connections with the UK, was ultimately (as we have already said) a matter for the FTT.

Ms Shaw’s final criticism was that the FTT was wrong to disregard as irrelevant a comparison of Mr McCabe’s personal and economic relations prior to and during the Relevant Period.

We reject that submission. The COVI test in Article 4(2)(a) of the DTC requires an examination of the taxpayer’s personal and economic relations during the period in issue. There is no provision in the test for any comparison to be made between an individual’s relations with one jurisdiction before and after the date on which the examined period commences. The test is, in that regard, fundamentally different from the common law test of residence, which does require such a comparison in order to determine whether ties with the State of original residence have been sufficiently loosened.

We therefore dismiss this ground of appeal.

In conclusion, for the reasons set out above, this appeal is dismissed.