Last week, the UK’s Supreme Court ruled against a final appeal by Robert Gaines-Cooper over a previous ruling which found him to still be resident in the UK for tax purposes and therefore liable for decades of back taxes.
At the same time, the Supreme Court ruled that Robert Davies and Michael James were non-resident in the 2001/02 tax year.
While giving their ruling, the judges criticised the Inland Revenue for a lack of clarity in its guidance on residency within its IR 20 guidance booklet. However, the lead judge in the case, Lord Wilson highlighted a paragraph in the guidelines which states: “If you have any difficulty in applying the rules in your own case, you should contact an Inland Revenue Tax Office.”
Wilson said, despite this instruction, there was no evidence to suggest that Gaines-Cooper’s advisers contacted the Revenue. “Nor did [Davies & James], who were at all material times advised by PricewaterhouseCoopers, seek such advice,” said Wilson.
Meanwhile, Lord Walker was even more disparaging, suggesting that the advisers chose to do nothing.
“The appellants had expert professional advisers, and it was well known to them that a large amount of tax was at stake,” said Walker.
“The guidance in IR 20 is far from clear, as Lord Wilson explains. Yet there is no suggestion that any attempt was made to seek clarification from an office of the Inland Revenue, still less that any specific guidance or assurance was given on the particular course of action proposed by the appellants. It seems possible that the preferred strategy was to let sleeping dogs lie, despite the obscurity of parts of IR 20.”
