An expat’s long-running £5.5 million tax battle with HM Revenue & Customs (HMRC) to prove he is not a British resident and does not owe the money has taken a new twist.
Appealing an HMRC victory confirming he was UK resident for tax purposes, James Glyn persuaded the First Tier Tribunal that he had severed his ties with Britain despite keeping a house in London.
Glyn explained he lived permanently in Monaco after emigrating in 2005.
He agreed that saving tax on a £29 million dividend paid to him by the family firm had a part to play in his decision, but also claimed other factors had influenced his thinking.
Glyn and his brother had 50% shares in property investment firm MGroup. Glyn resigned, gave up his share in the family firm and moved to Monaco when the dividend was paid in 2005.
£29 million dividend
Glyn decided to live in Monaco for five years to avoid paying tax on the dividend and then to move back to the home he had left behind in St John’s Wood, London, which he did in 2010.
HMRC argued he was a dual resident of Britain and Monaco during his time overseas and was liable to pay tax on the dividend.
Glyn told the tribunal that tax avoidance was not his only reason to move to Monaco.
He explained he was disenchanted by the ‘drudgery’ of business and his social life in Britain and wanted to make a new start.
Although he had often visited his former London home, he was careful not to breach the guidelines limiting his stays in HMRC guidance.
Clean break
HMRC claimed Glyn had not done enough to make a clean break with Britain by visiting his former home too often, keeping the house and cars in London, and attending business meetings.
The tribunal disagreed with HMRC’s case and allowed the appeal, finding Glyn had been tax resident in Monaco between 2005 and 2010.
The judge also criticised the way HMRC calculated the time Glyn spent in the UK and felt Glyn’s own formula was fairer and more accurate.
However, HMRC can appeal the verdict to the Upper Tribunal.
Although the case offers some insight into how HMRC and the First Tier Tribunal look at tax residence cases, the introduction of the Statutory Residence Test last year will dilute the effect of the ruling on taxpayers arguing tax residence issues after April 6, 2013.
