[2011] UKFTT 760 (TC) – TC01597 – 24 Nov 2011
Capital Gains Tax, as a matter of law, applies only to a person resident in the UK at least for part of a tax year. Section 2 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) states:
“… a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment during any part of which he is resident in the United Kingdom, or during which he is ordinarily resident in the United Kingdom”.
In this case HMRC enquired in to a self-assessment return made by the taxpayer for the year ended 5 April 2001. HMRC had information that the taxpayer had made capital gains on the disposal of two properties in the year to 5 April 2001. No capital gains were shown on the tax return for this year. Further to enquiry a closure notice was issued revising upwards the tax due. The taxpayer appealed against the closure notice on 18 November 2003 to the First-tier Tribunal on the basis that he was exempt from capital gains tax, as at the date of the disposals he was non-resident in the UK.
So the question before the tribunal was whether the taxpayer was resident in the UK during the tax year to 5 April 2001 so as to be chargeable to capital gains tax on the disposals.
The facts of the case were that the taxpayer was born was tax resident in the UK till 1977 when we went abroad for work. Thereafter, during the next few years, he worked in several countries including Saudi Arabia, Italy, UK, Switzerland, Spain, France and the US. He married in the UK in 1989 and post marriage purchased a number of properties in the UK in his own name. His marriage ended in divorce in July 1999 and then he decided to live in France, committing himself a property there in November 1999. It was at this stage that he considered himself to become non-resident in the UK permanently. The records showed that in 2000/01 he spent a total of 19 whole days in the UK followed by 27 days in the tax year 2001/02, 41 in 2002/03 and 2003/04 and 36 whole days in 2004/05. So in terms of physical presence he spent the greater part of his time out of the UK after April 2000.
HMRC’s contentions were based on its guidance contained in IR20. HMRC argued its case based on the taxpayer’s financial connections in the UK including various bank accounts, properties owned, and his constant visits to the UK. It also successfully argued that the taxpayer did not permanently reside for tax purposes in any other country including France, where the taxpayer intended to settle down.
The tribunal noted that there was evidence of the taxpayer intending to leave the UK for an indefinite period but there was insufficient evidence to prove that he did in fact relinquish his UK residency before the start of the 2000/01 tax year. That would have required his loosening his ties with the UK as also having a settled intention to have a real and closer connection to his new country of residence. Physical presence in a particular place did not necessarily amount to residence. Taking into account the amount of time the taxpayer spent in France and the nature of his presence there – unconnected with any contract of employment and that there appeared to be no expectation of continuity – indicated that although living in France, he remained resident in the UK.
The tribunal therefore found that the taxpayer was resident in the United Kingdom at some stage during the tax year ended 5 April 2001 and therefore assessable to capital gains tax on the disposals.
