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Tax Residency - Australian Entrepreneur Challenges Million-Pound CGT Bill

The belief that you cease to be a UK resident for tax purposes simply by staying out of the country for a certain number of days is a common fallacy. As a TV personality, entrepreneur and property investor found out to his cost, the legal test is very much more nuanced than that.

The man was born in Australia but prospered mightily after relocating to England in the 1980s. He was assessed for over £1 million in Capital Gains Tax (CGT) after selling various UK properties during the 2012/2013 tax year. In challenging the bill, he asserted that he was not resident in the UK for any part of that year.

Pointing out that he had spent only 38 days in the UK during the tax year, he said that he had, by then, returned home to Australia, as he had always intended to do. Having placed his UK home on the market, he was winding down his business interests in this country and returned here during the tax year only to tidy up his remaining affairs and say goodbye to his friends.

Ruling on the matter, the First-tier Tribunal (FTT) noted that the tax year pre-dated the introduction of a statutory residence test in April 2013. The previous, common law test thus applied to the case. The crucial issue was therefore whether he had made a distinct break in the pattern of his life in the UK to the point where he had ceased to have a settled or usual abode in this country.

The FTT acknowledged that he was intent on refocusing his business activities on Australia, where he owned a home, together with other properties, and where his family was based. He had, amongst other things, taken steps to realise his UK property assets and had shipped his Ferrari to Australia.

In rejecting his appeal, however, the FTT found that he had not, during the tax year, loosened his ties to the UK sufficiently to qualify for non-resident status. Although he put his UK home up for sale, he stayed there when he was in the country. He carried on as chairman of an English-registered company and maintained in Companies House filings that he was resident in England.

He had continuing business investments in this country and remained registered with a UK dentist and doctor. His girlfriend lived in England during the tax year, as did his dog, to whom he was greatly attached. Whilst he had set in train various steps to enable him to relocate to Australia, they had not, by the start of the tax year, reached the point of being a substantial loosening of his ties to the UK. Overall, the FTT found that he was UK tax resident for part of the tax year.