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

The Relevant Period pre-dates the statutory residence test. Although there were, at the time, limited statutory provisions addressing residence in particular circumstances – specifically s. 334 ICTA for ordinarily resident individuals leaving the UK for the purpose of “occasional residence abroad” and s. 335 ICTA for UK residents working full time abroad – neither party relied upon them. It was also agreed that Mr McCabe was not “ordinarily resident” in the UK during the Relevant Period.

The question was therefore whether Mr McCabe was resident in the UK during the Relevant Period on the basis of the case law principles on residence. It was common ground both before us and before the FTT that the approach to be taken is as set out by David Richards J in HMRC v Glyn [2015] UKUT 551 (TCC), §§40–50. In particular, §42 made the two general points that:

“First, it is entirely possible for a person to have more than one country of residence. A person previously resident in one country may take up residence in another country without losing his status of residence in the first country. Secondly, the approach to whether a person resident in the UK has ceased to be so resident is in some respects different from the approach to whether a person previously resident in another country has become resident in the UK.”

The judge went on at §43 to cite Lewison J’s summary in Revenue and Customs Commissioners v Grace [2008] EWHC 2708 (Ch) [2009] STC 213, §3, of the principles to be derived from earlier cases. The propositions in that summary which deal with the concept of “residence” (as opposed to “ordinary residence”) are as follows:

“i)

The word ‘reside’ is a familiar English word which means ‘to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place’: Levene v IRC (1928) 13 TC 468 at 505, [1928] AC 217 at 222. This is the definition taken from the Oxford English Dictionary in 1928, and is still the definition in the current online edition;

ii)

Physical presence in a particular place does not necessarily amount to residence in that place where, for example, a person’s physical presence there is no more than a stop-gap measure: Goodwin v Curtis (Inspector of Taxes) [1998] STC 475 at 480, 70 TC 478 at 510;

iii)

In considering whether a person’s presence in a particular place amounts to residence there, one must consider the amount of time that he spends in that place, the nature of his presence there and his connection with that place: IRC v Zorab (1926) 11 TC 289 at 291;

iv)

Residence in a place connotes some degree of permanence, some degree of continuity or some expectation of continuity: Fox v Stirk; Ricketts v Registration Officer for the City of Cambridge [1970] 3 All ER 7 at 13, [1970] 2 QB 463 at 477; Goodwin v Curtis (Inspector of Taxes) [1998] STC 475 at 481, 70 TC 478 at 510;

v)

However, short but regular periods of physical presence may amount to residence, especially if they stem from performance of a continuous obligation (such as business obligations) and the sequence of visits excludes the elements of chance and of occasion: Lysaght v IRC (1928) 13 TC 511 at 529, [1928] AC 234 at 245;

vi)

Although a person can have only one domicile at a time, he may simultaneously reside in more than one place, or in more than one country: Levene v IRC (1928) 13 TC 486 at 505, [1928] AC 217 at 223;

…

xiii)

Where a person has had his sole residence in the United Kingdom he is unlikely to be held to have ceased to reside in the United Kingdom (or to have ‘left the United Kingdom) unless there has been a definite break in his pattern of life: IRC v Combe (1932) 17 TC 405 at 411.”

As the last of those propositions and the earlier comments at §42 of Glyn both make clear, where a person has had their sole residence in the UK but then claims to have left the country, the question of residence is not applied in a vacuum, ignoring the fact of that person’s previous life in the country. Rather, in such a case the focus is on whether there has been a definite or distinct break in the pattern of their life.

In that regard, Lord Wilson in Gaines-Cooper v HMRC [2011] 1 WLR 2625 made the following comments:

“14.

Since 1928, if not before, it has therefore been clear that an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK. Although … the phrase ‘a distinct break’ first entered the case law in a subtly different context, the phrase, now much deployed including in the present appeals, is not an inapt description of the degree of change in the pattern of an individual’s life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place.

…

20.

… The requirement of a distinct break mandates a multifactorial inquiry. In my view however the controversial references in the judgment of Moses LJ in the decision under appeal to the need in law for ‘severance of social and family ties’ pitch the requirement, at any rate by implication, at too high a level. The distinct break relates to the pattern of the taxpayer’s life in the UK and no doubt it encompasses a substantial loosening of social and family ties; but the allowance, to which I will refer, of limited visits to the UK on the part of the taxpayer who has become non-resident, clearly foreshadows their continued existence in a loosened form. ‘Severance’ of such ties is too strong a word in this context.

21.

It became clear from decisions like Combe that, if a taxpayer left the UK in order to pursue employment abroad which was full-time, it was likely not only that he would cease to be a UK resident but also that he would escape being deemed still to be a UK resident under the statutory provision. For, from the fact that the employment was full-time, it was likely to follow that he had made a distinct break in the pattern of his life in the UK.”

Lord Hope in the same case likewise emphasised the multifactorial nature of the inquiry required for the determination of whether a taxpayer has become non-UK resident:

“63.

… the underlying principle that the law has established is that it must be shown that there has been a distinct break in the pattern of the taxpayer’s life in the UK. The inquiry that this principle indicates is essentially one of evaluation. It depends on the facts. It looks to what the taxpayer actually does or does not do to alter his life’s pattern. His intention is, of course, relevant to the inquiry. But it is not determinative. All the circumstances have to be considered to see what light they can throw on the quality of the taxpayer’s absence from the UK.”

Ms Shaw KC, for Mr McCabe, submitted that in applying the common law test of residence, a person’s abode should generally be identified by where they sleep at night. She referred in support of that submission to R v Hammond (1852) 117 ER 1477, 1480, where Lord Campbell noted that:

“A man’s residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression … In some instances he may be quite as well known if described of the place where he carries on his business; but this is never the place of abode in the ordinary sense of the expression ...”

The issue before the court in Hammond, however, concerned the election of borough councillors, and a requirement for each candidate’s “place of abode” to be specified on the voting papers. In that context, the question was whether the place of abode meant the particular candidate’s family residence, which was his “actual residence”, or could also include his place of business. As Mr Stone KC, for HMRC, pointed out, that was focusing on a choice between two bricks and mortar locations, and was an entirely different question from the question of whether an individual is resident in the UK, or has substantially loosened their ties with the UK, for tax purposes.

Ms Shaw also referred to Lysaght v HMRC (1928) 13 TC 511, which concerned the question of whether the taxpayer was resident for tax purposes, in circumstances where his family home was in Ireland but he travelled frequently to England for business purposes. The Special Commissioners found that he was resident in the UK for the relevant years. That was upheld by Rowlatt J. Ms Shaw emphasised the judgment of the Court of Appeal, which (by a majority) reversed the judgment of Rowlatt J, with Sargant LJ giving the example of someone:

“living in a house or lodgings at some such place as Richmond or Reigate and travelling to the City every weekday to earn his living there. In such a case everyone would say that he resided at the place where he slept and that he worked or earned his living in the City … One element in arriving at this conclusion would be that residence would ordinarily be determined by the place where he slept, not where he worked …” (p. 520).

The House of Lords, however, reversed the majority decision of the Court of Appeal and upheld the original decision of Rowlatt J, finding by a majority that the concept of residence should be given its plain meaning, and that its application was one of fact and degree for the Commissioners. The House of Lords did not place any particular emphasis on the question of where the taxpayer was sleeping. Viscount Sumner noted, instead, that the word “resident” indicated a “quality of the person charged” rather than being descriptive of the person’s property, and considered that a person was not precluded from being resident simply because they stayed at hotels rather than in their own house (p. 528).

Lysaght is not, therefore, authority for the proposition that particular weight must be given to the question of where a person sleeps at night, in the application of the common law test of residence. While that question is undoubtedly a relevant and important factor to consider, it is not an exclusive or determinative measure of presence in a particular location, and must be considered alongside all other relevant evidence of the time spent in that place, the nature of the taxpayer’s presence there and their connection with that place.