John Hargreaves who rose from market trader to owner of Matalan recently lost his Upper Tier Tribunal case on tax residence.
Why does this matter?
took advice from PWC on UK tax residence. He thought he had
successfully left the UK tax system and relocated to the glamorous tax
haven of Monaco.
Unfortunately, he retained his UK home, his Matalan directorship and spent many days in the UK during the tax year 2000 – 2001.
He initially stayed in a hotel in Monaco, only leasing an apartment there in November 2000.
The result is that his initial tax bill of £85 million has probably risen to a staggering £135 million!
His case is a historic one because in the 21 years since the event, he still faces a possible two further Court hearings if he wishes to appeal this decision.
The crux of what happened to him is as follows:
At that time, many tax professionals had a misperception that to escape UK tax residence, all that was required was a simple day-counting exercise
i.e. spending less than 90 days in the UK in a tax year would set you free!
Sadly, that was never really the true legal position.
This was only finally confirmed in the Supreme Court in the Gaines-Cooper case in October 2011.
UK tax residence still remains a complex legal issue, in spite of the introduction in 2013 of the Statutory Residence test.
This sort of abstract tax advice in a written report, with no continuing engagement with the client is doomed to failure.
We have seen many wordy reports produced from accountancy and law firms that fly straight over their clients’ heads.
Only sustained support can ensure that a client doesn’t end up in John Hargreaves’ situation.