A landmark ruling has overturned a leading UK expat non-resident tax case with a damning indictment of how a lower court considered their verdict.
HMRC v James Glyn went before the First Tier Tax Tribunal in November 2013.
Glyn won an appeal against a decision by HM Revenue & Customs (HMRC) that he was tax resident in the UK in 2005-06.
The case involved an income tax assessment against Glyn of around £5.5 million that HMRC claimed he owed.
The First Tier Tribunal was told Glyn kept a house in London where he lived until 2005, when he moved to Monaco, but during the year visited London 22 times and stayed in his former home.
Flawed judgement
The tax liability arose from Glyn selling his share of the family property business for £29 million.
HMRC has since appealed the tribunal decision to the Upper Tribunal.
The Upper Tribunal reversed the lower court’s decision and decided Glyn was tax resident in the UK in 2005-06 and he now faces settling the tax demand and paying legal fees and interest on unpaid tax as well.
The Upper Tribunal decided the First Tier Tax Tribunal decision as flawed in several ways:
- By applying a “legally irrelevant test” of why Glyn visited the UK
- By wrongly looking at why Glyn kept his London home rather than the tax implication
- By failing to consider relevant residence factors, such as family ties and continued ownership and use of the home
No clean break with the UK
The Upper Tribunal ruled that these factors indicated Glyn had not made a clean break from living in the UK and never intended to do so, as he moved back five tax years later in 2010.
The judge also pointed out that Glyn deliberately ‘metered’ his visits to try not to jeopardise his claim as a non-resident.
The ruling is open to appeal to a higher court and so far, Glyn has not indicated whether he will take the matter further.
For expats, the decision reinforces other cases won by HMRC against taxpayers who tried to prove they were non-resident but still maintained strong ties with the UK.
Read the full Upper Tribunal HMRC v James Glyn decision