It's good to see the UK making moves to change some of its tax rules for the wealthy onto a more realistic basis. Late last week came news that the Revenue had won a notable case against one of the so called 'Monaco Millionaires' who live in tax havens but work in the UK up to three days a week. This has been possible because until now the Revenue have disregarded days of arrival and departure when counting the number of days a person spends in the UK when seeking to establish whether they are resident here or not. This was fine in the days of steamships when the rules where established but was quite absurd when people were flying in on Monday morning and staying until Wednesday evening and claiming for tax purposes that this was just one day. Now the Revenue have won a ruling to say that two nights in the UK means two days here. Personally I'd have gone a stage further and would have argued that any presence here in a day would be enough to count. I hope that will follow in due course.
The relevance of this is that a person who spends more than 90 days a year in the UK on average over a period of more than three years is resident here. This change in the rules makes it harder for people to be considered non-resident here when they actually are in the UK for much of the year but seek to pay no tax.
The change in the ruling will, of course strike most people as plain straight-forward common sense. But Accountancy Age and the Times report that Mike Warburton of Grant Thornton is calling this move "moving the goalposts and changing the rules by the back door. There are going to be a lot of people who are significantly shaken by this decision".
There are times when you wonder whether some members of the profession should not just shut up in order to preserve any credibility they might have.
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The logic of the commissioner seems to be sound to me. This is not a subject that in my view lends itself to strict arithmetic tests without consdering other factors. IR20 does not purport to be a definitive statement of the law, but a guide only, and a guide that should not be applied in all circumstances.
As for Mike Warburton’s comments, I agree with you Richard. It seems to me he is adopting the lowest common denominator approach by trying to drag GT down into the gutter with the Big 4.
Any time spent in the UK? What about transit passengers passing through? The last time I checked, 24 hours represents a day. The government’s position makes sense and is a sensible amendment but I wonder whether such cases are indicative of something else? Having cake (business in UK) and eating it (living offshore). It’s hard to see how that is overcome without an exit of capital.
For about 10 years I have been advising that it is unwise to rely on deliberately contrived patterns of UK visits. For example, in Monday out Tuesday in Thursday out Friday. Does any one really believe that a judge (who will either never have travelled on a bus or not for 40 years and has never heard of Razorlight) will accept that this equates to no days spent in the UK? I once advised a former Inspector of Taxes who was hoping so in his own case.
Nevertheless I do take issue on one point with the pontificating hypocrites who would apply tax law by reference to some kind of universal moral principles. If they got a speeding ticket they would be outraged, morally, if they had been doing 30 in a 40 limit several months ago but which had now been reduced retrospectively to a 20 limit. It is morally reprehensible for HMRC to instruct Counsel to argue something arguably contrary to IR 20 (though as I say many have been advising for some time pessimistically about the weasel word “normally”, a word which the Red Queen in Alice would have adored). HMRC should long ago have fired a shot across the relevant bows by warning off those sailing close to the wind while also confirming they would recognise the often strange patterns of personal movement which are the product of modern working life.While Robson v Dixon was correctly decided does anybody believe that a KLM pilot should have been morally UK resident because of 20 UK take-offs and landings each tax year?
The three common features of HMRC psychopathology that I encounter regularly are:
1 intellectual dishonesty;
2 wishful thinking;
3 moving the goalposts retrospectively.
A recent example of the last is the “Halifax cases” in VAT. Because case decisions are declaratory and therefore retrospective in effect (subject in VAT to a 3 year time limit on assessment where there is no fraud or negigence) many traders have learned that they might have been guilty of “abusive practice” (i.e. organising their affairs to pay the least tax, perhaps as simply as by choice of route) although at the time they never knew it, because it has only just been dreamed up by the ECJ.
In my book people in public service who carry on like this should have a special place in Dante’s Inferno where the moral righteousness could be slowly burnt out of them in the course of eternity.
I allowed Jack Harper’s comment onto this site for one reason only. It somewhat proves my point, made often, that those in the ‘profession’ have lost their objectivity on issues relating to tax.
Many would agree the current rules ignoring the day of arrival and departure are too generous but the proposed change is absurd. You now have the absurd situation that I can arrive in London for a dinner at say 8pm and leave the following morning after breakfast and be deemed to have spent two days in the UK. I will have spent around 12 hours in the UK but be classed as having two days!! It makes no sense.
James
It makes perfect sense to me. You have benefitted from the infrastrcuture the UK provides over two days. Surely that creates a debt. If not, why not?
Richard