HMRC assessed B as liable to capital gains tax in respect of properties sold in the year ending 5 April 2001 pursuant to s2 of the Taxation of Chargeable Gains Act 1992. B owned three properties in his sole name, two of which were sold in the tax year ending 5 April 2001. B claimed not to be liable as he was not resident in the UK in that tax year. B lived and worked in the UK from 1980. He married in 1989. He became a self-employed consultant in 1995. In 1998 B and his wife separated and by July 1999 they were divorced. B continued to live at the matrimonial home in Hertfordshire. He purchased a property in Provence in October 1999 and claimed at that point that it was his intention to move permanently from the UK. A sale of the matrimonial home was agreed, subject to contract, but this did not proceed. B’s possessions remained there until 25 May 2001 and on 1 June 2001 the property was let. In August 2000 B purchased a property to enable him to stay near his children, but the contact arrangements did not work out and this property was subsequently sold. In his tax returns for 1999/2000 and 2000/2001 B did not claim to be non-resident. This claim was not made until September 2005. B was unknown to the French tax authorities. B claimed that this was because he had soon formed the intention to leave France and move to Spain.
Held (dismissing B’s appeal)
- (1) Residence is not defined and is determined by the facts of each case in light of the principles established by the case law, Commissioners of Inland Revenue v Zorab (1926) 11 TC 289 applied.
- (2) Evidence of intention is required to support a claim for non-residence status. No particular period of absence or presence in the UK is prescribed but the actual residency and the regularity and frequency of return visits are facts to be taken into account together with family and business ties. The availability of living accommodation in the UK is a factor (but is not decisive) as is the fact that that an individual has a home elsewhere, Levine v IRC (1928) applied. In order to be non-resident a person must not only have loosened his ties with the UK, and have a settled intention in that regard, but also to have closer connections with his new country of residence; Goodwin v Curtis applied.
- (3) Although it is not essential to show a distinct break, it will be difficult to show that UK residence has been lost unless a clear and definite change in the taxpayer’s pattern of life has occurred in the process of leaving the UK.
- (4) B made a decision to leave the UK for France in or around October 1999. He found a property the purchase of which was completed on 12 April 2000. He made arrangements to sell or let the properties he owned in the UK. B was making preparations to physically leave the UK by 5 April 2000. He was in the UK for 19 days in 2000/01, 27 days in 2001/02, 41 days in 2003/2004 and 36 days in 2004/2005. His address for post-2000 tax returns was the former matrimonial home, as it was for his passport and his bank account in France. B did not declare that his French property was his principal private residence. No non-residence claim was made in his self-assessment tax returns. He was unknown to the French revenue authorities. B had no contract of employment in France and his presence there appeared to have been transitory with no expectation of continuity.
- (5) The period in France was a period of transition that lasted for at least part of the tax year 2000/2001 during which time B remained resident in the UK. He was therefore liable to a charge to capital gains tax in respect of the disposal of the properties sold in that tax year.