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

Ms Shaw submitted that the FTT had been invited to make a finding as to whether Mr McCabe had left the UK to take up full time employment abroad, but had failed to do so. That was, she contended, an error of law which might have made a difference to the FTT’s decision. She cited the Upper Tribunal’s decision in Khan v HMRC [2020] UKUT (TCC) as support for this submission.

Mr Stone submitted that there was no requirement for the FTT to make any determination on whether Mr McCabe had taken up full time employment abroad. He said that such a finding would not add anything, and would not dispense with the FTT’s need to carry out a multifactorial review of Mr McCabe’s situation to determine his place of residence.

In Khan the central issue was whether a company’s buy-back of shares was a distribution taxable in the hands of Mr Khan under ss. 383 and 385 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA). The issue on appeal involved consideration of whether a series of transactions should be regarded as a single composite transaction (as Mr Khan contended) or as a series of individual steps.

The Upper Tribunal found that the question of whether s. 385 ITTOIA required transactions to be looked at as a composite whole or not was a question to be determined by reference to the statutory purpose of the provision in question. This was a question of law. The question of whether the transaction was a composite transaction was then a question of fact (§26). Accordingly:

“27.

… once a factual issue is relevant to the application of the statute to the case in question, a particular finding as to that issue is a finding of fact with all that entails in terms of susceptibility to the challenge on appeal. Understood thus, the appellant’s ground is, in essence, that, having regard to the statutory purpose of the provision (s 385 ITTOIA), the FTT failed to make relevant findings of fact. In our view that ground properly raises a question of law rather than a question of fact.”

The Upper Tribunal went on to conclude that the FTT had erred in failing to construe the relevant provisions in light of their statutory purpose, the consequence of which was that it could not be assumed that the FTT’s fact-finding with respect to the issue necessarily encompassed the facts relevant to the statutory question (§37).

Khan thus addresses the factual findings relevant for a different statutory scheme (ss. 383 and 385 ITTOIA). It provides no support for the submission that the FTT was required as a matter of law to make a finding as to whether Mr McCabe was working full time abroad. Rather, whether that is a matter on which the FTT was required to make a finding turns on the application of the common law test for the concept of residence. As set out above, particularly in Gaines-Cooper, the inquiry is a multifactorial one which must take into account a broad range of factors.

Ms Shaw relied on the comments of Lord Wilson at §21 of Gaines-Cooper,which she cited as authority for the submission that a determination as to whether someone is working full time abroad is “a bright line indicator” that they are likely to have loosened their ties sufficiently with the UK in order to be treated as non-resident, or in other words a “rebuttable presumption” of non-residence, applying absent very specific circumstances.

We disagree. Lord Wilson expressly acknowledged that the question as to whether a person had made a distinct break from the UK was one that required a multifactorial inquiry. His comments at §21 went no further than saying that if someone had left the UK to take up full-time employment abroad it was “likely” that they had made a distinct break and loosened their ties with the UK. If the Tribunal does, therefore, conclude that the taxpayer has left the UK to take up full-time employment abroad, that will be an important factor in the inquiry.

That is, however, very different from the proposition that a rebuttable presumption or “bright line indicator” of non-residence arises in such a case. Still less is Gaines-Cooper authority for the proposition that the Tribunal must in every case make a distinct finding as to whether the taxpayer has taken up full-time employment abroad. The requirement is simply to consider “all relevant circumstances” (Glyn §41).

Those circumstances will, of course, include consideration of where the taxpayer was working during the relevant period (if the taxpayer was indeed working in that time), and how easy it is to commute between different locations for work and other activities. The FTT in this case properly considered that question, setting out in considerable detail its evaluation of Mr McCabe’s work patterns, including his travel during the Relevant Period, with extensive details of the meetings he attended at various locations (§§104–123), and further findings on the board meetings and other meetings attended by Mr McCabe in relation to his UK businesses (§§145–150). The FTT therefore considered, very carefully, where Mr McCabe was working during the Relevant Period, and took that into account in its overall conclusion on residence.

We therefore reject the submission that the FTT erred by failing to make a finding as to whether Mr McCabe was working full-time abroad during the Relevant Period.

In any event, we agree with Mr Stone that on the basis of the FTT’s findings of fact (which are not challenged in this appeal) it would not have been possible to describe Mr McCabe as having worked full-time abroad during the Relevant Period, given the amount of work he conducted in the UK during that time.

We accept that Mr McCabe spent the majority of his time over the Relevant Period working outside the UK. However it is also clearly the case that he spent a significant amount of time working in the UK. Unlike an office-based worker with regular working hours, Mr McCabe was an internationally mobile businessman who was not predominantly working from his Brussels office, but held business meetings at a variety of locations in different countries. The FTT found that a significant number of those took place in the UK (§147, and see further references at §§69–70 below). The FTT also found that from October 2006 onwards Mr McCabe spent a significant proportion of each week in the UK (§108).

Ms Shaw argued that Mr McCabe’s evidence was that he was working at least 50 hours a week in Brussels and elsewhere outside the UK, in addition to any work he conducted in the UK, and that he therefore spent time working outside the UK which was equivalent to a full-time job. His time spent working in the UK was not, she said, significant, but was simply an adjunct to his full-time work outside the UK.

We unhesitatingly reject that submission. Any consideration of where a taxpayer is working, for the purposes of the residence test, cannot sensibly refer to an abstract count of hours spent working in particular locations, but must take account of the nature of the taxpayer’s occupation and the reality of their working arrangements. If the taxpayer is working long hours in several locations, it would be both artificial and arbitrary to ignore the location of some of that work on the grounds that the taxpayer’s working time exceeded what might be regarded as the hours of a “normal” working week. In the present case Mr McCabe was a businessman working (by his own account) long hours which included a considerable amount of travel. It would be wholly unjustifiable to exclude his travel to and time spent in the UK from an analysis of his working pattern.

We therefore dismiss this ground of appeal.