The First-tier Tribunal has dismissed an appeal against a CGT assessment for £1,087,413.68, upholding HMRC’s determination that the appellant was UK resident for the year of disposal and thus subject to CGT. The circumstances of the case predated the current statutory residence test (SRT) (Lyons v HMRC [2023] UKFTT 294 (TC)).
The CGT law as it applied at the time held that that a person was chargeable to capital gains tax in a year of assessment “during any part of which he is resident or during which he is ordinarily resident in the UK”. To escape CGT on the contested disposals in 2012-13 Mr Lyons would therefore have to have become non-resident before 6 April 2012.
Prior to the SRT, residence was determined under common law, with the Supreme Court decision in Gaines Cooper setting out the guiding principles that:
“an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK…the phrase “a distinct break”… is not an inapt description of the degree of change in the pattern of an individual’s life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place.”
And that considering whether such a distinct break had occurred “mandates a multifactorial enquiry” to consider whether there had been “a substantial loosening of social and family ties”.
In considering the facts, the tribunal judged:
“Overall therefore we conclude that while it is clear that Mr Lyons had set in motion various steps to enable him to relocate to Australia in 2012, those steps had not reached the point of being a “substantial loosening of ties to the UK” until after 6 April 2012. As a result Mr Lyons was UK tax resident during a part of 2012/13.”
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08765.html
Related content from Claritax Books
The statutory residence test (SRT) for individuals is especially relevant for income tax and CGT but the rules also apply in some circumstances for IHT and corporation tax purposes.
In Residence – the Definition in Practice, tax barrister Keith Gordon’s usual clear and incisive analysis presents the rules in a form that is at once accessible and practical.
