The confusion created by the Gaines-Cooper case rumbles on. It seems faintly ridiculous that the arg...
The confusion created by the Gaines-Cooper case rumbles on. It seems faintly ridiculous that the argument centres around when a day is not a day, but of such minutiae, landmark decisions are made.
Tax adviser Carol Wells, from Irwin Mitchell Solicitors, examines the ramifications of the case in detail on page 32, but the fact that it has made headline news in Britain's national newspapers tells its own tale.
On the one hand, it has been common knowledge that expats could slightly bend the rules of residency by not counting travelling days towards their allowance of days spent in the UK. This has been established procedure for years and to change things now with a possible retroactive tax charge is hardly fair.
But examples such as Mr Gaines-Cooper, who has his son at an English school, retains membership of Ascot racecourse and attends various shooting parties in the UK, show how easy it can be to take advantage of the system.
Is Gaines-Cooper in the wrong? Morally his actions may be redolent of someone thumbing their nose at the UK tax authorities but, legally, he was within the law, or at least the law as it appeared to have been practised.
If his appeal fails and the precedent is established, then many other expats will be carefully counting their days. HM Revenue & Customs (HMRC) has not stated any intention to go after others, but you can bet your bottom dollar that it will do so if given the powers.
There are plenty of high-profile figures in similar positions, such as Ken Bates, who somehow manages to combine being chairman of Leeds United Football Club in England's north-east with living the high-life in Monaco.
Glancing through HMRC's IR20 leaflet again, it is clear that not much is clear when it comes to establishing residency. It starts simply enough: anyone who is in the UK for 183 days or more in a tax year is a resident, with no exceptions. But then it gets cloudy. And it is that cloudiness that expatriates have been used to taking advantage of, with the implicit agreement of the tax authorities it is worth pointing out.
The key confusing phrase in IR20 is "the normal rule is that days of arrival in and departure from the UK are ignored in counting the days spent in the UK". This is the crunch issue, which could affect thousand of other expats. HMRC can obviously decide that the "normal" rule does not apply, as it has done with Gaines-Cooper.
There are other potential horrors lurking in IR20. For instance, if expats spend days in the UK for reasons beyond their control, such as illness of a family member, then those days "are not normally counted". The phrase suggests there is scope for the Revenue to take an even more hard-line approach.
The net result is that advisers need to be even more careful when discussing tax arrangements. Give out woolly advice and a client could be left with a hefty tax bill. And they won't just be unhappy with that result, they are likely to want recompense for the mistake.
Achievements, charity work and other happy snippets
Laughable excuses for persisting
Spent 56 years at Schroders
Warns on profits