No guarantees on 90-day rates

There has been a rash of crucial tax decisions in recent weeks. The Dextra
case handed a crucial victory to HM Revenue & Customs in its battle against
employee benefit trusts.The negligence suit between BE Studios and Smith &
Williamson also yielded interesting points about the tax system.

One case that slipped below the radar is Shepherd versus HMRC.

The case challenged a crucial aspect of tax law: rules on residence.

The taxpayer, an airline pilot, spent fewer than 90 days in the UK, but was
resident for tax purposes as ‘there was no distinct break’ in his lifestyle, the
Special Commissioner ruled.

Inland Revenue guidance has always given a view that if an individual lived
in the UK for fewer than 90 days, he or she would not be classified as resident
here for tax purposes. Now a ‘distinct break’ will have to be proved.

‘Taxpayers will need to prove not just that they are here for less than 90
days but whether they still have a job in the UK, where their family are, and
what has happened to their property,’ said Narinder Paul of KPMG.

So if a ‘distinct break’ needs to be proved, does that mean you could live in
the UK for longer than 90 days and have made the crucial break?

Paul thinks the Revenue is unlikely to accept that argument.

There is a whole range of taxpayers affected by the move, not just the very
rich who move around in order to avoid tax.

The taxpayer in the case itself was a pilot, demonstrating the range of those
affected.

Advisers say that tens of thousands of people are likely to be impacted.

Paul said: ‘There is no doubt that this is the next stage of the Revenue’s
clampdown on those individuals who are benefiting from favourable tax rates by
basing their claim on the 90-day rule. With increasing ease of travel and homes
overseas becoming increasingly common, it is likely that more people may be
considering that they could be a non-UK resident for tax.’