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You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Shepherd v Revenue and Customs [2005] UKSPC SPC00484 (20 June 2005) URL: https://www.bailii.org/uk/cases/UKSPC/2005/SPC00484.html Cite as: [2005] UKSPC SPC484, [2005] UKSPC SPC00484 |
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Shepherd v Revenue and Customs [2005] UKSPC 00484 (20 June 2005)
SPC 00484
INCOME TAX – Schedule E – residence and ordinary residence - Appellant was an airline pilot who flew long haul flights from and to the United Kingdom – agreed that until October 1998 the Appellant was resident and ordinarily resident in the United Kingdom - from October 1998 the Appellant also rented a flat in Cyprus – after that date he continued to fly long haul flights from and to the United Kingdom and spent most of his off-duty time either in the United Kingdom or in Cyprus - whether in the year of assessment 1999/2000 the Appellant was resident and ordinarily resident in the United Kingdom – yes – appeal dismissed – ICTA 1988 ss 19, 334 and 336
THE SPECIAL COMMISSIONERS
IAN HUGH SHEPHERD
Appellant
- and -
HM REVENUE AND CUSTOMS
Respondents
Special Commissioner: DR A N BRICE
Sitting in public in London on 1, 2 and 3 March and 10 May 2005
Michael Sherry of Counsel, instructed by Wilfrid T Fry Ltd Taxation Consultants, for the Appellant
Ingrid Simler of Counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2005
DECISION
The appeal
The legislation
"1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which fall under one or more than one of the following Cases –
Case I any emoluments for any year of assessment in which the person holding the office or employment is resident and ordinarily resident in the United Kingdom …
Case III any emoluments for any year of assessment in which the person holding the office or employment is resident in the United Kingdom (whether or not ordinarily resident there) so far as the emoluments are received in the United Kingdom."
The issues
The evidence
Ms Tracey Christou of Cyprus;
Ms Androula Frangoudis of Cyprus;
Mr Takis Hadjioannou, the President and Mr Michael Philis the Secretary, of the Cyprus Offshore Golf Club;
Mr J E Humphreys, Flight Crew Resource Manager of British Airways;
Mr R A W Jones, the Secretary of Crusader Gliding Club;
Mrs B H Shepherd, the mother of the Appellant and Mr Colin Shepherd, his brother; and
Mr Nicholas Waite of Cyprus;
were produced at the hearing. Rule 17(4) of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 SI 1994 No. 1811 provides that, in assessing the truth and weight of any evidence, the Tribunal may take account of its nature and source and the manner in which it is given. In assessing the truth and weight of the evidence in these written statements I bore in mind that the witnesses did not attend the hearing to give oral evidence and so were not available to be questioned.
The facts
The Appellant, his employment and his family
"The Air Navigation Order places responsibility for the avoidance of fatigue on both the operator and the individual crew member. British Airways does not normally impose restrictions on where an individual chooses to live. Nonetheless, it must be emphasised that it is an individual's responsibility to ensure that the travelling time from home to duty does not become a factor in the onset of fatigue. It is a requirement of the British Airways Flight and Duty Time Limitations Scheme that crew members should consider making arrangements for temporary accommodation near to base if the journey time from home to the normal departure aerodrome is usually in excess of 1:30min.
Crew members are reminded that it is their responsibility to ensure that they present themselves in such a rested state that will allow them to adequately complete their duties."
The Appellant and Cyprus
The Appellant's arrangements after October 1998
The Appellant's financial arrangements
The events surrounding the retirement of the Appellant
The Appellant and income tax
The enquiries of the Revenue
"(a) Mr Ian Shepherd provided the following documents to my Department in order to support his claim that he is resident in Cyprus and to obtain exemption from UK on his pension:
(i) copy of the immigration permit for permanent residency issued on 7 February 2000;
(ii) contract of lease for the flat he rented since 1 October 1998;
(iii) income tax returns for the years 1998 to 2000;
(iv) UK Form X/individual for certification by my Department.
(b) The date on which he first notified my Department that he was liable to Cyprus tax was the 22.4.2000.
(c) Having regard to the above my Department was convinced that he is a UK retired pensioner who chose to reside in Cyprus and pay tax on his pension on remittance basis.
(d) Despite the fact that his claim for such tax treatment was for the year 1998 onward my Department accepted his claim as from the year 2000. This was based on the fact that he stayed in Cyprus for a very limited period of time during the years 1998 and 1999.
(e) Mr Shepherd declares on his income tax return that he is married and that the immigration permit mentioned in paragraph (a) above makes reference to his wife, Ursula Anna Shepherd. No other details about his wife are available in my file."
The arguments for the Appellant
The arguments for the Revenue
Reasons for Decision
The three areas of disputed fact
The Appellant's presence in the United Kingdom
The Appellant and his wife
The use by the Appellant of the Wokingham house
The authorities
"Of course it is perfectly right to say that a man has not got to have a residence in the shape of a building to be resident in this country. That is quite clear. But I think that one has to consider not only the time that he is in this country but the nature of his visit and his connection with the country … Because the question to be solved is not whether he is resident for the five months he is here, but whether he is resident for the whole year during the time he is not here. … This gentleman seems to be a mere traveller. … All that can be said about it is that in the course of his habitual travels he spends a considerable period every year in England."
"My Lords, the word "reside" is a familiar English word and is defined in the Oxford English Dictionary as meaning "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place". … In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure. … But a man may reside in more than one place. Just as a man may have two homes – one in London and the other in the country – so he may have a home abroad and a home in the United Kingdom, and in that case he is held to reside in both places and to be chargeable to tax in this country."
"If , for instance, such a man is a foreigner, who has never resided in this country there may be great difficulty in holding that he is resident here. But if he is a British subject the Commissioners are entitled to take into account all the facts of the case … . Further the case may be different, and in such a case regard must be had to [what is now s 334 of the 1988 Act] which provides that every British subject whose ordinary residence has been in the United Kingdom shall be assessed and charged to tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad."
"The expression "ordinary residence" … is contrasted with occasional or temporary residence; and I think it connotes residence in a place with some degree of continuity and apart from accidental or temporary absence. So understood, the expression differs little in meaning from the word "residence" … and I find it difficult to imagine a case in which a man while not resident here is yet ordinarily resident here."
"My Lords, the word "ordinarily" may be taken first. The Act on the one hand doe not say "usually" or "most of the time" or "exclusively" or "principally", nor doe it say on the other hand "occasionally" or "exceptionally" or "now and then" .. . I think that the converse to "ordinarily" is "extraordinarily", and that part of the regular order of a man' life, adopted voluntarily and for settled purposes, is not "extraordinarily". Having regard to the time and duration, the object and the obligation of Mr Lysaght's visits to England, there was in my opinion evidence to support a finding that he was ordinarily resident, if he was resident in the United Kingdom at all. … Grammatically, the word "resident" indicates a quality of the person charged and is not descriptive of his property, real or personal."
- that the concept of residence and ordinary residence are not defined in the legislation; the words therefore should be given their natural and ordinary meanings (Levene);
- that the word "residence" and "to reside" mean "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place" (Levene);
- that the concept of "ordinary residence" requires more than mere residence; it connotes residence in a place with some degree of continuity (Levene); "ordinary" means normal and part of everyday life (Lysaght) or a regular, habitual mode of life in a particular place which has persisted despite temporary absences and which is voluntary and has a degree of settled purpose (Shah);
- that the question whether a person is or is not resident in the United Kingdom is a question of fact for the Special Commissioners (Zorab);
-that no duration is prescribed by statute and it is necessary to take into account all the facts of the case; the duration of an individual's presence in the United Kingdom and the regularity and frequency of visits are facts to be taken into account; also, birth, family and business ties, the nature of visits and the connections with this country, may all be relevant (Zorab; Brown);
- that a reduced presence in the United Kingdom of a person whose absences are caused by his employment and so are temporary absences does not necessarily mean that the person is not residing in the United Kingdom (Young);
- that the availability of living accommodation in the United Kingdom is a factor to be borne in mind in deciding if a person is resident here (Cooper) (although that is subject to s 336);.
- that the fact that an individual has a home elsewhere is of no consequence; a person may reside in two places but if one of those places is the United Kingdom he is chargeable to tax here (Cooper and Levene);
- that there is a difference between the case where a British subject has established a residence in the United Kingdom and then has absences from it (Levene) and the case where a person has never had a residence in the United Kingdom at all (Zorab; Brown);
- that if there is evidence that a move abroad is a distinct break that could be a relevant factor in treating an individual as non-resident (Combe); and
- that a person could become non-resident even if his intention was to mitigate tax (Reed v Clark).
"334 Commonwealth citizens and others temporarily abroad
Every Commonwealth citizen or citizen of the Republic of Ireland-
(a) shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom for the purpose only of occasional residence abroad, and
(b) shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains whether they arise from … any trade profession, employment or vocation in the United Kingdom or elsewhere."
.
"336. Temporary residents in the United Kingdom …
(2) For the purpose of Case I … and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has.
(3) The question whether-
… (b) for the purpose of subs (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there
shall be decided without regard to any living accommodation available in the United Kingdom for his use."
Conclusion
Decision
DR A N BRICE
SPECIAL COMMISSIONER
RELEASE DATE:20 June 2005
SC 3089/2004