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Expat tax case hinges on law of gravity

High-net-worth tax exiles are likely to face increased scrutiny from the tax office after a British entrepreneur based in the Seychelles lost a landmark court ruling last week.

Businessman Robert Gaines-Cooper faces a tax bill estimated at £30m, after losing a High Court appeal over his tax status.

The court ruled he could not be excused from the tax bill despite spending fewer than 91 days in England because the country had remained “the centre of gravity of his life and interests”. The case centres on old HM Revenue & Customs UK tax-residency guidance known as IR20 that says that if an individual spends fewer than 91 days in the country he/she was treated as a tax exile.

Last year, HMRC replaced this with a HMRC6 booklet which emphases the importance of “pattern of lifestyle” in determining UK residency.
It states that “just because you leave the UK to live or work abroad, does not necessarily prove that you are no longer resident here”.

Austrian corporate financier And-reas Tuczka who is based in London is the latest to lose a long running dispute with HMRC after claiming “not-ordinarily resident” status.

The rulings have sparked concerns that thousands of high-earners will be targeted by HMRC and be forced overseas in search of more favourable tax regimes.

Accountancy firm Saffery Champness partner Ronnie Ludwig says: “Residency rules remain blurred as there is still no statutory definition of UK residency and domicile in spite of a desperate need for one.”

International law firm Withers partner Christopher Groves adds: “This uncertainty is one of the main factors that is increasingly serving to drive wealth creators away from the UK and to place the UK at a competitive disadvantage in an international context.”

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