Expat loses £1.75m CGT tax case

Lisa Smith, BA (Hons), CeFA

The importance of severing all ties with Britain as an expat was highlighted in yet another recent  tax tribunal case.

Lynette Yates considered herself an expat when she moved from Britain to Spain between 2000 and 2008 – believing because her residence was now abroad that she was beyond the reach of HM Revenue & Customs.

However, HMRC argued she was still a UK resident for capital gains tax purposes, despite those years abroad.

As a result, she was assessed for CGT for £1.75 million on asset disposals while she was overseas.

Living in Spain

Ms Yates appealed the assessments on the grounds she was not a UK residence and was exempt from CGT on her British gains under a double taxation treaty with Spain.

The first-tier tribunal heard that she had moved to Spain as she suffered from Gaucher disorder, a disease that affects the nervous system.

Despite living in Spain, Ms Yates regularly visited the UK,. but remained outside of the country for at least 183 days a year.

However the tribunal decided that she had not cut ties with the UK because her husband still lived Nottingham and she stayed at the matrimonial home when she came to the UK.

The tribunal also heard that she had UK bank accounts and credit cards, and that statements and other letters were sent to the Nottingham address.

The tribunal accepted Ms Yates was resident in Spain for tax purposes for most of the time she was abroad.

No distinct break

However, the tribunal also accepted the HMRC argument that she her main home was in Britain – because

  • Ms Yates retained a permanent home available in the UK
  • She had always before 2000 lived in the UK, her family was in the UK, her possessions were in the UK with the exception of the Spanish apartment.
  • Family ties were of sufficient importance to Ms Yates to make her spend 191 days in the UK in  2002 against only 137 days in Spain and that later, in 2008 when her marriage was threatened she chose to return to her husband in the UK rather than to remain in Spain – despite the benefits to her health of Spanish residence
  • Her financial affairs were tied to British banks even when in Spain

The tribunal dismissed Ms Yates’ appeal against the CGT assessments on the grounds she had not made a ‘distinct break in the patterns of her life on moving to Spain’.

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