[2011] UKFTT  36 (TC)

TC00913

Appeal number: SC/3036/2007

 

INCOME TAX – Appellant a British Airways pilot who was present for part of year in UK for purpose of his employment - Appellant owned and occupied two properties one in the UK and one in South Africa - whether Appellant resident and ordinarily resident in the UK

 

 

FIRST-TIER TRIBUNAL

 

TAX

 

LYLE DICKER GRACE Appellant

 

 

- and -

 

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

 

 

TRIBUNAL: Barbara Mosedale (TRIBUNAL JUDGE)

 

 

Sitting in public at 45 Bedford Square, London WC1 on 2, 8 & 9 November 2010

 

 

Mr K M Gordon and Miss X Montes Manzano, Counsel,  instructed by Sharpe Pritchard, for the Appellant

 

Ms I Simler QC and Mr A Nawbatt, Counsel,  instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

 

 

© CROWN COPYRIGHT 2011

DECISION

 

1.       Mr Grace appealed against a notice of determination dated 10 June 2004 that he was ordinarily resident in the UK for the six years from 1997/98 to 2002/03 inclusive.  The case was heard by Special Commissioner Dr N Brice on 29 November 2007 and her decision in favour of the Appellant that he was neither resident nor ordinarily resident in the United Kingdom (“UK”) was released on 29 January 2008 and a corrected version re-released on 2 May 2008. 

2.       HMRC appealed this decision.  The appeal was heard before Mr Justice Lewison on 4 November 2008 and his decision issued on 11 November 2008:  HMRC v Grace [2008] EWHC 2708 (Ch).  In his decision he concluded that the Special Commissioner had made errors of law in arriving at her decision and, further, that the only possible conclusion from the primary facts found was that Mr Grace was resident in the UK: see paragraph 44.  It was agreed by the parties that if Mr Grace was resident in the UK then he was also ordinarily resident here.

3.       Mr Grace appealed this decision.  The appeal was heard on 5 October 2009 and the Court of Appeal released its decision on 28 October 2009:  Grace v HMRC [2009] EWCA Civ 1082. The decision was unanimous and the leading judgment given by Lord Justice Lloyd.  Lloyd LJ concluded that the Special Commissioner had mis-directed herself but did not agree with Lewison J that there was only one possible conclusion to the question of residence based on the primary facts as found at first instance. The Court of Appeal therefore remitted the case to the First-tier Tribunal (Tax Chamber) which had by then replaced the Special Commissioners.

4.       In this Decision I refer to passages from all 3 judgments.  For ease of reference, I will adopt the shorthand used by the parties in the hearing.  So, for instance, I will refer to paragraph 23 from Dr Brice’s decision as “SPC23”.  Any paragraph number from Lewison J’s judgment I will preface with “HC” and similarly any paragraph number from Lloyd LJ’s judgment I will preface with “CA”.

The issues at the remitted hearing

5.       At Mr Grace’s original hearing in front of the Special Commissioner in 2007 there were four issues to resolve:

(a)        Whether Mr Grace was resident in the UK;

(b)        Whether Mr Grace was ordinarily resident in the UK;

(c)        Whether s334 ICTA 1988 displaced the common law position;

(d)        Whether s336 ICTA 1988 displaced the common law position.

6.       Before me the parties were agreed that ordinary residence would follow residence.

7.       They were also agreed that s336 ICTA 88 was no longer an issue.  S336 provides:

“(1) A person shall not be charged to income tax….as a person residing in the United Kingdom….if-

(a)  he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and…..”

8.       The parties were agreed that the effect of s336 was to override the common law in certain cases and allow a resident person to be subject to tax as if he was non-resident.  The Appellant accepted (as he must in view of the Court of Appeal’s finding at CA 30 that he was not in the UK for some temporary purpose only) that he could not rely on s336 to override a finding (should one be made) that he was resident in the UK.

9.       The parties were not agreed on whether s334 was in issue.  The effect of s334 was that it displaced the common law position so that someone who had been ordinarily resident but had ceased to be ordinarily resident in the UK was nevertheless still chargeable to tax on his entire income if he had only left the UK for the purpose of occasional residence 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, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and….”

10.    Mr Gordon believed HMRC had conceded this was not relevant to this case.  Both the Appellant’s and HMRC’s skeleton arguments were on the basis that neither statutory provision was in issue before me and  Lewison J recorded at HC 6 “Miss Simler accepted that if Mr Grace had left the United Kingdom by reason of having set up home in Cape Town, he had left for more than occasional residence abroad. I need not, therefore, consider it [ie s334] further.”

11.    In her submissions in front of me, however, Ms Simler argued she was not bound by her concession in front of Lewison J because the facts had been largely reopened at this hearing.  In particular she said, in the cross-examination in front of me, Mr Grace said that he knew every time he went to South Africa, he would be coming back to the UK and that this suggested to her that his residence in South Africa was indeed merely “occasional”.

12.    In general, the rule is that parties should not be taken by surprise by submissions made by the other side.  It is clear to me that, up until Miss Simler’s mention of s334 when she opened HMRC’s case on 8 November, the Appellant, with good reason, believed HMRC had conceded the point.  I find the submission on s334 put the Appellant at a disadvantage:  Mr Grace had already given his evidence on 2 November and left the country.  He was not present in the hearing on 8 & 9 November during the legal submissions.  His counsel could not ask him about the nature of his residence in South Africa, as, at the time Mr Grace gave evidence, it was not known HMRC wished to resile on its concession on s334.

13.     In any event, I do not consider that Mr Grace’s evidence did materially change before me:  it is implicit in the findings of fact made by Dr Brice in 2007 that Mr Grace knew each time he left the UK to go to his home in South Africa that he would later be returning to the UK. So I conclude that Miss Simler is bound by her concession that s334 does not apply to Mr Grace:  failing to give earlier warning of the new submission put the Appellant at a disadvantage and there was no reason (such as a change in evidence) for such a late warning.

14.    As will be seen, in the event this turned out not to be relevant.

The law

Principles

15.    So all I am called to decide is whether Mr Grace was resident in the UK in the years in question.  Residence is a matter of common law.  There is no statutory definition. The principles on residence derived from case law are summarised by the Court of Appeal in Grace (at CA5-9) by repeating summaries from Lewison J in Grace in the High Court at HC 3 and from Dr Brice in Shepherd SPC 484 at paragraph 58. 

16.    Miss Simler invited me to consider the cases on ordinary residence as well as on residence because if a person was ordinarily resident in the UK it follows that they are also resident in the UK.  Ordinary residence is a sub-category of residence (see Lord Buckmaster in Lysaght at page 535 “…and if residence be once established “ordinary residence” means in my opinion no more than that the residence is not casual and uncertain but that the person held to reside does so in the ordinary course of his life.”  So one can be resident but not ordinarily resident, but it is not possible to be ordinarily resident but not resident.

17.    As it is conceded Mr Grace had a settled purpose because of his employment by British Airways, I do not find it helpful to consider the question of ordinary residence:  the question for this Tribunal is whether he is resident at all, because if I find he is resident, the Appellant has conceded that he is also ordinarily resident.  So I consider the question of residence and not the question of ordinary residence.

18.    So although I repeat the Court of Appeal’s summary at CA 6-8 of Lewison J and Dr Brice’s principles on residence here, I omit (vii), (viii), (x) & (xii) as they relate solely to ordinary residence:

“ ‘(i) The word "reside" is a familiar English word which means "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 v Commissioners of Inland Revenue (1928) 13 TC 486, 505. This is the definition taken from the Oxford English Dictionary in 1928, and is still the definition in the current on-line edition;

(ii) Physical presence in a particular place does not necessarily amount to residence in that place where, for example, a person's physical presence there is no more than a stop gap measure: Goodwin v Curtis (1998) 70 TC 478, 510;

(iii) In considering whether a person's presence in a particular place amounts to residence there, one must consider the amount of time that he spends in that place, the nature of his presence there and his connection with that place: Commissioners of Inland Revenue v Zorab (1926) 11 TC 289, 291;

(iv) Residence in a place connotes some degree of permanence, some degree of continuity or some expectation of continuity: Fox v Stirk [1970] 2 QB 463, 477; Goodwin v Curtis (1998) 70 TC 478, 510;

(v) However, short but regular periods of physical presence may amount to residence, especially if they stem from performance of a continuous obligation (such as business obligations) and the sequence of visits excludes the elements of chance and of occasion: Lysaght v Commissioners of Inland Revenue (1928) 13 TC 511, 529;

(vi) Although a person can have only one domicile at a time, he may simultaneously reside in more than one place, or in more than one country: Levene v Commissioners of Inland Revenue (1928) 13 TC 486, 505;…..

(ix) It is wrong to conduct a search for the place where a person has his permanent base or centre adopted for general purposes; or, in other words to look for his "real home": R v Barnet LBC ex p Shah [1983] 2 AC 309, 345 and 348;……

(xi) Although residence must be voluntarily adopted, a residence dictated by the exigencies of business will count as voluntary residence: Lysaght v Commissioners of Inland Revenue (1928) 13 TC 511, 535;….

 (xiii) Where a person has had his sole residence in the United Kingdom he is unlikely to be held to have ceased to reside in the United Kingdom (or to have "left" the United Kingdom) unless there has been a definite break in his pattern of life: Re Combe (1932) 17 TC 405, 411’…..

(paragraph 7)…..‘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 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)’

(paragraph 8) As regards that last point, the proposition that a home elsewhere is of no consequence is not to be understood as meaning that the other home is entirely irrelevant to the necessary enquiry.  That would be inconsistent with the obligation to take into account all the facts of the case.  However, the existence of another home is not decisive, because of the possibility of simultaneous residence in several places.”

19.    Mr Gordon would also omit (ix) and (xi) from the summary on the basis that they relate to ordinary residence rather than residence per se.

20.    I think (ix) is relevant to residence.  Although I agree the point was made in a case (Shah) which solely concerned ordinary residence, Lord Scarman made the point (page 348) in the context of saying that ordinary residence should not be confused with domicile.  If ordinary residence should not be confused with domicile then this must be even more true of residence itself (as one cannot be ordinarily resident unless resident).  So the point I think is equally applicable to both residence and ordinary residence.

21.    I have also included point (xi) as relevant to residence and not just ordinary residence.  Lewison J’s point (x) clearly relates to ordinary residence: 

“There are only two respects in which a person's state of mind is relevant in determining ordinary residence. First, the residence must be voluntarily adopted; and second, there must be a degree of settled purpose: R v Barnet LBC ex p Shah [1983] 2 AC 309, 344;”

22.    His following two sub-points (xi) and (xii) then relate to these two states of mind for ordinary residence.  However, point (xi) about the residence being voluntary is also stated in other cases (in particular Lysaght as explained below) in relation to residence rather than just ordinary residence.  So I have included it in the list of principles for residence.  The ‘settled purpose’ is however restricted to ordinary residence as also appears from Lord Buckmaster in Lysaght at page 535:

“A man might well be compelled to reside here completely against his will; the exigencies of business often forbid the choice of residence and though a man may make his home elsewhere and stay in this country only because business compels him, yet none the less, if the periods for which and the conditions under which he stays are such that they may be regarded as constituting residence, it is open to the Commissioners to find that in fact he does so reside, and if residence be once established “ordinarily resident” means in my opinion no more than that the residence is not casual and uncertain but that the person held to reside does so in the ordinary course of his life.”

23.    It is true that Lord Buckmaster here seems to see stays in the UK for the purpose of employment or business as in some sense involuntary but nevertheless capable of resulting in residence, which is the same in effect as the later courts’ interpretation of stays for business purpose as being voluntary and capable of resulting in residence for tax purposes.  But he makes the point that it is when those stays become settled (ie not casual or uncertain) that a person becomes ordinarily resident.  So residence per se does not require a settled purpose but does have to be voluntary (at least in the sense that if it is dictated by a person’s employer, that person has chosen his employment).

24.    In any event the point is not relevant in this case because the parties are agreed that if resident Mr Grace will be ordinarily resident as he does have the settled purpose in the form of his employment with British Airways. 

Is residence adhesive & must there be a distinct break?

25.    Miss Simler considers that residence has an adhesive nature.  Mr Gordon does not.  Miss Simler’s point is that it is harder for a person who has been resident to show that they are now not resident than it is for a person who has not previously been resident to show that they have not acquired residence. 

26.    Both parties are agreed that s334 gives common law ordinary residence an adhesive nature in that it is only applicable to a person whose ordinary residence has been in the UK and its effect is to cause that taxpayer to retain UK residence when as a matter of common law he might have lost it.  Mr Gordon’s point is that if common law ordinary residence was adhesive, s334 would have been unnecessary.  I cannot agree that this is necessarily the case.

27.    Mr Gordon cited OJSC Oil Company Yugraneft v Abramovich and others [2008] EWHC 2613 (Comm) where there was no discussion of the  appellant having to show a distinct break from the UK in order to demonstrate that he was not resident.  However, as Mr Gordon recognised, Mr Abramovich had not been previously resident in the UK.  Mr Gordon’s point is that in his opinion the same position is true for UK residents:  they do not have to show a distinct break in order to become non-resident.   

28.    Miss Simler cites Zorab (supra) and Brown (1926) 11 TC 292 as showing that residence has an adhesive nature.  Zorab was a case of someone who having not previously been resident in the UK, was found not to be resident despite spending many months at a time in the UK (he lived in hotels and visited friends and was described by Rowlatt J as a “mere traveller”).  Brown, in contrast, was a case of a man who had been resident in the UK.  Similarly to Mr Zorab, Mr Brown was living in hotels and visiting friends and family. Despite spending about 3 months a year in the UK he was held to have become non-resident.  I am unable to see how these cases demonstrate that residence as a matter of common law has an adhesive nature as Mr Brown did manage to shed it.ouseHouHHHHHHioh;fih

29.    Miss Simler also cites Levene  (supra) as authority for the adhesive nature of residence.  Miss Simler sees Levene as a case where the taxpayer failed to show a distinct break with the UK and thus was found to be resident and ordinarily resident here.  Viscount Cave LC says at page 506:

 “But probably the most difficult case is that of a wanderer who, having no home in any country, spends a part only of his time in hotels in the UK and the remaining and greater part of his time in hotels abroad.  In such cases the question is one of fact and of degree, and must be determined on all the circumstances of the case…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…”

30.    Lord Cave went on to imply that it might be different for a person who had been resident in the UK although I find his comments were clearly made with the predecessor of s334 in mind.

31.    Miss Simler also cited Combe (1932) SpC 17 TC 484 where at page 411 Lord Sands refers to the taxpayer (found to be non-resident) having made a ‘distinct break’ from his residence in the United Kingdom.  She also refered to Reed v Clark 58 TC 528 as a case where a taxpayer made a distinct break with the UK and was found to be non-resident.

32.    Miss Simler also referred me to the decision of Moses LJ in Davies and James (1) Gaines-Cooper (2) [2010] EWCA Civ 83 at paragraph 52.  In this case, Moses LJ was interpreting IR 20 and in particular whether it was enough for paragraph 2.7-2.9 of IR 20 for someone to be non-resident if they visited the UK for no more than the number of days expressed (in particular less than 91 days on average per year).  He concluded that construed as whole these paragraphs required a taxpayer to show that he had left the UK permanently or indefinitely and that he visited no more than the maximum number of days expressed.  Moses LJ goes on from this to say that in order to show that the taxpayer has left permanently or indefinitely the taxpayer needs to demonstrate a distinct break and in particular that “he has severed his ties to the extent that his previous social and family ties in the UK are no longer retained.”  He concludes that such a severing is “significant” and “often dispositive impact” on the question of whether the taxpayer has left permanently or indefinitely (paragraph 44).

33.    However, the question of whether a taxpayer has left permanently or indefinitely is a question raised in s334 (because a previously resident taxpayer remains taxable if he has only left for a temporary purpose.)  Is a distinct break required to establish non-residence as a matter of common law?  Moses LJ goes on to say in paragraph 52 that this in not only the correct interpretation of IR20 but one that is consistent with case law (although of course case law deals with s334 as well as the common law position).  He goes on to say:

“the adhesive quality of residence is reflected in the reference in s334 to ‘occasional residence abroad’.  The notion of a distinct break from previously held ties provides a clear test as to whether previously held residence, for example in the UK, has ceased permanently or indefinitely.  It distinguishes exclusive residence abroad from dual residence, a concept recognised in Grace (ie Court of Appeal at para 6viii)….”

“I cannot accept that [IR 20] provides a warrant for ignoring so obvious a factor for determining whether a taxpayer hitherto resident and ordinarily resident in the UK has ceased to be so and has left permanently or indefinitely….There can be no sensible reason why one of the most telling features of such a cessation, a distinct break from family and social ties in this country, should be ignored.  It would not create clarity or simplicity; it would merely remove from consideration an obvious test of permanent or indefinite absence abroad.” (paragraph 53)

34.    Mr Gordon says it is apparent from paragraph 47 of Moses LJ’s decision that adhesive means no more than that a person who is resident in the UK will not necessarily lose that status by acquiring a residence elsewhere.  I cannot agree: the phrase “adhesive” is used by Moses LJ specifically in reference to the need for a UK resident to show a distinct break with ties in the UK. 

35.    My conclusion from this is that in Gaines-Cooper and Levene the Court of Appeal considered a distinct break with the UK was essential if a person was claiming to have left the UK permanently or indefinitely for the purposes of s334 (paragraph 52) and therefore IR 20.  This is not surprising:  unless there has been a distinct break with the UK, a person will only have left temporarily.

36.    However, I find that the court did not (as it did not need to) consider whether a “distinct break” was essential for someone shedding common law residence.  On the contrary all their comments on “distinct break” are in the context of it as a test of permanent or indefinite absence abroad.

37.    The Court of Appeal did consider “distinct break” in the context of common law residence in their earlier decision in this case.  In Grace at CA 33 the Court of Appeal repeated Lewison J’s reference (HC43)  to a distinct break as (merely) a tool to help determine residence without criticism and at paragraph 6(xiii)(set out in full above) the Court of Appeal referred to the fact it was “unlikely” residence would be lost unless there was a distinct break.

38.    It seems to me that the concept of ‘residence’ is the same for everyone (except where altered by statute as in s334 and s336) but that someone who has had UK residence needs to demonstrate that they have lost it, which is something a non-UK resident does not have to do in order to demonstrate that they are not UK resident.

39.    Decided cases on the common law meaning of residence have not held that it is essential that a distinct break is shown.  However, although I agree with Mr Gordon that it is not essential to show a distinct break,  it must be difficult (as the Court of Appeal said at paragraph 6(xiii)) to show that UK residence has been lost unless a distinct break in the taxpayer’s pattern of life  has occurred.  I can envisage a set of circumstances where a taxpayer gradually runs down his connections with and presence in the UK to the extent that ultimately he becomes non-resident without actually ever one year on another making a distinct break.  However, the point is not relevant in the context of this case where it is not suggested that Mr Grace gradually ran down his connections with the UK.  The question is whether the change in his circumstances in September 1997 was sufficient to convert his resident status to non-residence:  so in practice Mr Grace will have to show a sufficient break in his pattern of life.

The evidence at the remitted hearing

40.    The Court of Appeal remitted the question of Mr Grace’s residence.  At CA 36 Lloyd LJ said:

“For the reasons given in paragraph 30 above, I agree with Lewison J, and with Ms Simler’s submissions, that the Special Commissioner did misdirect herself in law as regards her treatment of the appellant’s presence in this country in order to fulfil the duties of his employment for the purposes of section 336.  I also agree with them that this misdirection affected her decision as regards residence generally.”

41.    That was the extent of the misdirection and at CA40 Lloyd LJ said it was for the Tribunal to decide again:

“how the balance stands as between [the appellant’s presence in this country in order to perform his tasks as a BA long haul pilot…using the house which he has retained in Horley] and related factors connecting the appellant with this country on the one hand, and his connections with South Africa on the other hand, in terms of satisfying the non-statutory tests for residence and ordinary residence.”

42.    The Court of Appeal ordered that the case be re-considered if practicable by Dr Brice.  In the meantime, however, Dr Brice had retired, and the case had to be heard by a different panel.  The Court of Appeal also ordered that the parties should apply to the Tribunal for directions as to the nature and extent of the reconsideration of the appeal including what if any oral hearing should take place and whether it should be open to either party to adduce further evidence.

43.    I explain below the case management history of this appeal since it was remitted to explain why this Tribunal has not relied solely on the findings of fact made by Dr Brice but has had new evidence in front of it.  I then set out what my findings of fact are.

44.    A Directions hearing came on before Judge Walters QC on 18 June 2010.  The parties were agreed that Judge Walters said it would be of assistance for the Judge deciding the case to hear the witness and the Appellant was given leave to adduce oral evidence. 

45.    The Appellant also had concerns with the proper interpretation of SPC23 and wished to adduce further evidence on it.  His counsel agreed with the Court of Appeal who had said that SPC23 was “compressed” (CA 34).  The Appellant considered that the new panel would make mistaken inferences from SPC23 if the evidence Dr Brice had heard in relation to it was not explained more fully.  Judge Walters’ Directions gave permission for further evidence in relation to SPC23 to be adduced at the remitted hearing.

46.    As authorised by this Direction, Mr Grace prepared a further witness statement dealing (as his representatives saw it) with the issue of the first two sentences of SPC23. This was referred to as his first witness statement.  HMRC considered that the scope of the first witness statement was wider than permitted by Judge Walters so by agreement the disputed passages were removed and added to the second witness statement to which I refer below.

47.    The first and second witness statements were served on HMRC on 29 July.  HMRC objected to the second being admitted.  Apart from the paragraphs transferred from the first witness statement (which the Appellant if not HMRC considered to be supplementary to the question on the proper meaning of SPC23), the other paragraphs of this witness statement were an explanation of the two day count tables in paragraphs SPC 18 & 20 and a final paragraph bringing the Tribunal up to date with Mr Grace’s current position.

48.    At the start of October 2010, HMRC served some tables on the Appellant which they wished to be in front of the Tribunal.  The Appellant objected to them in his third witness statement.  HMRC’s response was that they had merely put the evidence in front of the original Tribunal into table format.  The Appellant wanted to know the methodology.  So at this point HMRC served a witness statement (with 3 exhibits) from Ms K Means, an officer of HMRC, explaining the methodology she adopted in preparing the tables and including the information on which the tables were based. The tables were based on Mr Grace’s diary and log sheet which he had provided to HMRC when the dispute commenced.  Due to HMRC’s error, Dr Brice only had the diary and logs for the first 3 years in the original hearing:  HMRC now wanted to introduce the diary and logs for the last 3 years in dispute as well.

49.    The Appellant objected to Ms Means’ witness statement and exhibits in relation to the last 3 years as this was evidence not in front of Dr Brice.  They did not object to the evidence on which the tables were based for the first 3 years coming in (although they did object to the methodology on which the table itself was prepared). In  response, the Appellant served a witness statement by Ms Roberts, a solicitor with Sharpe Pritchard, the firm acting for the Appellant.  This statement with its two exhibits contained similar tables to Ms Means’, based on Mr Grace’s diary and log books but using a different methodology. 

50.    On 21 October HMRC requested that the Tribunal have in its bundle Mr Grace’s original witness statement from the hearing in front of Dr Brice and the transcripts of the two taped interviews conducted by HMRC of Mr Grace.  The Appellant did not object (but did point out that they considered this inconsistent with HMRC’s previous approach that this Tribunal should be bound by Dr Brice’s findings of fact).

51.    The case was due to be heard on 2 November. At the start of it the Appellant’s counsel made an application to admit Mr Grace’s second and third witness statement and Ms Roberts’ statement and exhibits:  HMRC applied to admit Ms Means’ statement and exhibits.

52.    I allowed in all the evidence sought to be admitted.  It all appeared relevant to the question of Mr Grace’s residence.  The question, therefore, was whether there was a compelling reason to exclude it (per Lightman J in Mobile Export 365 Limited [2007] EWHC 1737 (Ch) at paragraph 20). I found no compelling reason to exclude it even though it would extend the length of the remitted hearing. 

53.    For a start, it had already been directed that further evidence could be introduced in respect of SPC 23: there seemed no good reason to refuse it in respect of SPC 18 & 20 where there was clearly a dispute over which of the two tables Dr Brice had preferred if either. I also took into account that this remitted hearing is not what the Court of Appeal intended:  they wished Dr Brice to conduct it.  That was not possible and so it is before a new Judge.  I had to form my own opinion of the evidence and of Mr Grace.  I rely on Dr Brice’s findings of fact but in respect of the two points in Dr Brice’s decision (SPC 23 and the day count tables) where the parties do not agree on the inferences to be drawn, I would be assisted by hearing and seeing the evidence.  On this basis, I allowed in Mr Grace’s second witness statement and HMRC’s tables for the first three years.  And as some of the statements made by Mr Grace in this statement were very general and applied to all the six years under appeal it was right to allow HMRC to introduce the log books and diaries for the additional 3 years in dispute.  It also followed (as HMRC agreed) that Ms Roberts’ statement and tables would be admitted too.

The facts

54.    The facts I find are as found by Dr Brice as supplemented (or, in a few minor matters, altered) by the evidence heard at the hearing in front of me and as I explain below.

55.    The facts as found by Dr Brice were recorded in paragraphs SPC5-SPC23.  I repeat them here with the following minor alterations as agreed by the parties.  I have shown the agreed deletions with a strikethrough and the agreed substitutions underlined.

56.    Where further evidence has been introduced in respect of one of Dr Brice’s findings, I have put Dr Brice’s finding in italics and explain my further findings below.

“The facts

5. From the evidence before me I find the following facts.

 

1952-1979

6. The Appellant was born on 18 May 1952 in South Africa and regards himself as domiciled in South Africa. His parents went to Kenya when he was five years old and while there they opted to become naturalised British citizens. Thus the Appellant became a naturalised British citizen while still a minor in Kenya, He still travels on a British Overseas Citizens passport which he renewed in October 1998.

 

7. The Appellant undertook his higher education in a boarding school in South Africa and his family moved back to Pretoria in South Africa as he was finishing school. In 1970 the Appellant started to fly aeroplanes in South Africa and qualified there as a pilot in 1971  However, he was unable to obtain employment as a pilot in South Africa. with South African Airlines but worked as commuter airline pilot in South Africa for a few years from 1971. In 1974 the Appellant was married in South Africa to a United Kingdom citizen. However, there was a separation in 1978 when the Appellant’s wife returned to the United Kingdom with their two daughters. Since that time the Appellant has had no contact with his children.

 

1979-1997

8. The Appellant first arrived in the United Kingdom in 1979 and obtained a United Kingdom pilot’s licence in 1980. He started working for Loganair in the same year. In 1982 that contract was terminated and he returned to South Africa.

 

9. In 1986 the Appellant returned to the United Kingdom and obtained a higher commercial pilot’s licence. In April 1987 he was employed as a long haul pilot by British Caledonian which was taken over in 1988 by British Airways. The long haul flights captained by the Appellant commenced from Gatwick or Heathrow Airports. In 1987 the Appellant purchased a house in Crawley which he sold in 1990 when he purchased another house in Horley. Horley is near Gatwick Airport. That house cost £105,000 and was valued at £250,000 in 2007 and has two bedrooms and a study. It was purchased with a 100% mortgage from Alliance and Leicester. The Horley house was the Appellant’s principal residence from 1990 to 1997. 

 

10. In 1997 the Appellant’s marriage was dissolved since when the Appellant has met his first wife on only two occasions. In the same year the Appellant planned to marry another United Kingdom resident but that did not proceed. The Appellant was then unhappy in the United Kingdom and was looking for a change of direction in his life. His parents and brother lived in Johannesburg and he wished to see more of them.  He knew Cape Town well because his sister had lived there and he had friends there. He made some work trips to Cape Town and then decided that he would live there and commute to the United Kingdom for his work. He did not notify Alliance and Leicester that he was leaving the United Kingdom but he did notify the insurers of the Horley house that it was likely to be unoccupied for longer periods and paid an increased premium. He did not inform British Airways that he was no longer resident in the United Kingdom but there was no requirement that he should.

 

1997 – South Africa

11. On 6 August 1997 the Appellant set up home in Cape Town, South Africa while continuing his employment with British Airways. Initially he rented an apartment and then  He moved into a house which he bought but for the first two weeks he only rented it while waiting for legal formalities of the purchase to complete was transferred to him a year later. The house is in Greenways Country Estate, Strand, Cape Town and was purchased with the aid of a mortgage. It has three bedrooms. The house was acquired fully furnished although the Appellant brought from the UK a video recorder. The Appellant extended the house in 2000. It has a satellite dish and broadband internet connection. The house is near a golf course, and there is access to swimming pools, tennis courts and a beach. In evidence which I accept the Appellant said that all his neighbours lived in their homes permanently; in other words, they did not treat their homes as holiday homes. The Appellant uses the Cape Town house when he is there. He owns a BMW motor car which is kept in Cape Town. 

 

12. The Appellant holds a private pilot’s licence in South Africa. In 2000 the Appellant became a Life Member of the Harvard Club of South Africa and flies the Club’s Harvard historic aeroplanes. In the same year he became a member of the Stellenbosch Flying Club and is still a member. He owns a Cessna aeroplane which he flies there and for which he leases hangar space. In 2002 the Appellant was a founder member of a five-member syndicate that imported a 1960 ex-RAF Jet Provost Mk 3A aeroplane to South Africa where it was delivered to Cape Town Airport. The Appellant still owns his share of the Provost and flies it. The Appellant flies his radio-controlled aircraft at the Helderberg Flyers Club in Somerset West which is not far from Cape Town.

 

13. In 2005 the Appellant purchased a plot of land in Somerset West and will be building a home there in September 2008. He has a well-structured social network in South Africa. He is registered with a doctor and dentist in South Africa. His parents and brother live in South Africa and he has a sister in Australia.

 

1997 – links with the United Kingdom

14. Since 1997 the Appellant has retained the Horley house in the United Kingdom which he uses in order to rest before or after carrying out his duties as a long haul pilot or if he has only a few days between flights. The house is fully furnished and has a computer with broadband access to the internet, a satellite dish and a dvd player. The house is not let and the Appellant retains vacant possession. He is on the Electoral Roll at Horley as a resident. Post is sent to the Appellant at the Horley address; this includes credit card statements, bank statements and correspondence with HMRC. However, the Appellant accesses his duty rosters on his computer or on his laptop. The only money recently spent on the Horley house was in 2005 for the replacement of windows and doors to improve security and to keep the property maintained.

 

15. The Appellant keeps a car in the United Kingdom and uses it to travel from the Horley house to work and from work to the house.  The present car is six years old and has only done 33,600 miles which accounts for the journeys from his house to work and back. The Appellant has a bank account in the United Kingdom into which his salary from British Airways is paid. The Appellant is registered with a dentist in Horley but, in the entire time that he was in the United Kingdom, he only visited one dentist and that was the British Airways dentist at Gatwick whom he visited privately. The Appellant made four visits to his doctor in Horley between 1993 and 2003.

 

16. The Appellant has no relatives in the United Kingdom. His ex-wife and daughters live in the United Kingdom but he has had no contact with his children for over 30 years. He has only met his ex-wife twice in the last thirty years. He is a member of the professional body of the British Airline Pilots Association but is not a member of any other club or society in the United Kingdom.

 

17. The Appellant plans to retire when he is sixty years old and does not intend to make any visits to the United Kingdom when he retires.

 

Frequency of visits to the United Kingdom

18. The Appellant had prepared schedules for each of the first three years of assessment under appeal showing the days he spent (1) on his work (2) out of the United Kingdom (3) in the United Kingdom (4) in training (5) sick and (6) on standby. The schedule for the year 1997/98 began on 1 September 1997. His summaries showed: 

 

Year of  assessment	Total days in UK	Total days in Cape Town
1997/1998*	41	91
1998/1999	71	110
1999/2000	70	130

* = after 1 September 1997

 

19. The Appellant accepted that his figures did not include days of arrival in, or departure from, the United Kingdom but did include days of arrival in, and departure from, Cape Town. Also he had not counted days when he arrived in the United Kingdom in the morning and left in the evening of the same day. Also, when he had been sick in the United Kingdom he did not include that as a day spent in the United Kingdom.  Also, the Appellant’s schedules included as time spent in Cape Town time when he was working and piloting an aeroplane to Cape Town.

 

20. The Revenue calculated that if the figures were to include the days of arrival and departure in the United Kingdom, and the days when the Appellant was sick in the United Kingdom, and the days when the Appellant arrived and left the United Kingdom on the same day, and did not show as days in Cape Town days spent in flight to and from Cape Town, the day count would be:

Year of  assessment	Total days in UK	Total days in Cape Town
1997/1998*	86	81
1998/1999	146	103
1999/2000	139	109

* = after 1 September 1997

21. The Appellant did not dispute that these figures were accurate on the basis they had been calculated.

 

Duration of visits to the United Kingdom

22. The Appellant claimed that, during the six years in issue in the appeal, there were only three occasions when he spent more than seven consecutive days in the United Kingdom. The number of occasions when he spent time in South Africa were:

Number of consecutive days	Number of occasions
More than 7	60
More than 14	33
Over 21	13

 

23. On the evidence before me I find that the pattern of the Appellant’s life after 1 September 1997 was that the long haul flights he made would last about four or five days. For two or three days before or after each flight he would stay in the United Kingdom. He piloted a number of flights to and from Cape Town. In addition there were regular breaks of thirteen to fifteen days which were spent in Cape Town. I conclude that the time spent in the United Kingdom was time either before or after a flight, or time when the Appellant was sick, but that most of the other time not spent in the air was spent in Cape Town.”

Further findings of fact by Dr Brice

57.    It was the Appellant’s case that paragraphs SPC5-23 were not the entire primary facts found by Dr Brice, but findings later in her decision should also be accepted by me as findings of fact made in this case. Not repeating those parts of the Dr Brice’s decision which Mr Gordon agrees have been specifically set aside, he considers I am bound by the following: 

 “In this appeal, in the relevant years of assessment, the Appellant had a residence in South Africa where he spent his time when he was not performing the duties of his employment.” [SPC 31 – end]

“Applying those principles to the facts of the present appeal it is relevant that, after 1997, the nature of the Appellant’s presence was to get to and from his work.  He had very few connections with this country.  He was not born here, he was not educated here, and no members of his family lived here apart from his divorced wife and children whom he has not seen for thirty years.  He has no social life here.  He did reside here from 1986 to 1997, during which time he began his present employment which he has retained….” [SPC 37]

“I find that after 1997 the Appellant did not dwell permanently in the United Kingdom as his permanent residence was in South Africa.  Also the United Kingdom was not where he had his settled or usual abode as that was in South Africa” [SPC 40]

“I find that although the Appellant was resident in the United Kingdom before 1997 in that year there was a distinct break and since then his settled mode of life has been in South Africa.  In 1997 he set up home in South Africa and purchased a house there.  The home is near his parents and brother.  He is very attached to his private aeroplanes and it is significant that they are all in Cape Town and that there are none in the United Kingdom.  He intends not to return to the United Kingdom when he retires.” [SPC 42]

“It was accepted that the Appellant was a Commonwealth citizen….However, in my view his presence abroad after that date was not for the purpose only of occasional residence abroad but for the purposes of continuous and settled residence in his house in Cape Town punctuated only by the need to visit the United Kingdom for the purposes of his work.”  [SPC 55]

“He was here in order to do his work and for no other reason.” [SPC 59]

 

58.    Mr Gordon omits the end part of paragraph SPC 37, 40 and 42 as a conclusion on the facts which was set aside by the Court of Appeal (as Dr Brice’s conclusion in SPC 37 and 42 was that Mr Grace “only” visited because of the requirements of his employment and in SPC 40 was that his house was not a home but more in nature of a hotel:  see CA 24, 30 & 36).

59.    HMRC do not consider that I am bound by these findings set out above.  HMRC say that after SPC23 Dr Brice was reaching conclusions on the facts for the purposes of applying the legal principles.  In so summarising the facts she was reliant on her findings in SPC5-23 and those paragraphs exclusively contain the primary findings of fact.  In any event it is Miss Simler’s view they have been entirely set aside by the Court of Appeal as infected by Dr Brice’s error on the “temporary” nature of Mr Grace’s purpose in coming to the UK for the purposes of his employment.

60.    The above quotations from SPC 31, 37, 40 and 42 are from Dr Brice’s discussion of the application of the law to the facts of the case by comparing Mr Grace’s case to those of earlier cases.  It is clear to me that in doing this she is not making further findings of primary facts but relying on (and summarising) her findings of fact as set out in SPC5-23. 

61.    SPC 31  I note that SPC31 could be read as a finding that the Appellant spent his time in South Africa when he was not working:  that is not consistent with the facts as found by this Tribunal.  It is clear that the Appellant chose to spend time in the UK when he was not working if the interval between the two work flights was short:  see paragraph 77-110  below.

62.    SPC 37 This paragraph largely repeats some of the primary facts.  To the extent it comes to a conclusion, the Court of Appeal did not regard it as a firm conclusion but merely a pointer to Dr Brice’s eventual conclusion that Mr Grace was not resident in the UK.  This was a finding that was set aside and so I do not consider myself bound by SPC 37 except to the extent it repeats primary facts from SPC5-23.

63.    SPC 40 I do not understand Mr Gordon to be really asking me to accept SPC40 as a finding of fact by Dr Brice, but merely inviting me to reach a similar conclusion.  He points out that although the passage was criticised by Miss Simler before the Court of Appeal, that Court specifically rejected the criticism (CA 23 and 34), although on the basis that the passage had to be interpreted as not excluding the possibility of having two places of residence at once.  In any event I consider that SPC 40 expresses a conclusion which Dr Brice had reached on the primary facts set out earlier in her decision notice and SP40 is not binding on me:  a finding that Mr Grace did not “dwell permanently” in the UK nor have a “settled abode” here is tantamount to a finding he was not resident here whereas that is the question which the Court of Appeal has remitted to this Tribunal to decide.  I will consider the question afresh.

64.    SPC 42  Similarly, I reject the suggestion that I am bound by Dr Brice’s finding in SPC 42 that there was a distinct break.  That is inextricably linked to the question of residence (as explained above in paragraphs 25-39) and that is the question which the Court of Appeal has remitted to this Tribunal to decide.  In any event, as Mr Gordon notes, the Court of Appeal was inclined to disagree with Dr Brice’s conclusion that there was a distinct break (see CA33) so they cannot have intended this Tribunal to be bound by it.

65.    By way of side note, in SPC42 Dr Brice refers to the Appellant’s home being near that of his parents and brother.  All parties were agreed at the hearing in front of me that this was only “near” in a relative sense:  Cape Town is roughly 900 miles from Johannesburg but clearly considerably closer than Horley.

66.    SPC 55 & 59  The conclusions expressed in SPC 55 and 59 were made in the context of Section 334 and Section 336 respectively.  Again it is clear that Dr Brice was relying on her primary findings of fact in making these conclusions and I do not consider that I am bound by them.

67.    In particular, I agree it follows from the findings of primary facts that it was only because of his employment with British Airways that Mr Grace had any presence in the UK.  Although he chose to remain in the UK where there was only a short break between his work flights, it is clear he would not have been here at all were it not for his employment.  And it seems to me that this was the interpretation that the Court of Appeal put on that sentence that Mr Grace “was here in order to do his work and for no other reason” from SPC59 and the reason why they agreed with it.  It is clear that the Lord Justice (paragraph CA30) did not agree with the whole of SPC59. 

68.    In conclusion I do not accept that any of the above paragraphs 31-59 from Dr Brice’s decision are binding on this Tribunal except to the extent they repeat the primary facts. 

My further findings

Witness statements

69.    As mentioned above, Mr Grace produced 3 new witness statements (although the last dealt with his objection to the admission of HMRC’s tables).  I find that in the  second witness statement (described as “supplementary”) Mr Grace was inclined to make generalisations that were not entirely borne out by the evidence from his log books and diaries. 

70.    For instance, when explaining why he would chose to stay in the UK if he only had less then 5 days between trips he says “I would try and go for a short trip to Europe”.  In fact his foreign holidays were not as frequent as this might suggest: there were 4 in 1998/99 one of which was adjacent to time in South Africa, two in 1999/00, four in 2000/01 with one of these being adjacent to time in South Africa, two in 2001/02.  The first part-year shows no foreign holidays and the last part-year shows a 10 day foreign holiday that does not fit his description of filling in a short time otherwise spent in the UK.

71.    He also says “I do not engage in any social activity when I am in Horley” yet it was also plain from his interviews with HMRC that he had girlfriends while in the UK during some of this period.

72.    There were also over generalisations in his first witness statement (the one permitted by Judge Walter’s direction and dealing with SPC 23).  In this he said generally on the morning of the day he was due to work he would fly into Heathrow as a passenger from South Africa.  I find that while this may well be what he does now, it was not what he did for the years in question.  Looking at his own log and taking into account that he called any day where he started in South Africa as “HOME CPT” (as he himself said he counted all days travelling to and from South Africa as whole days in South Africa) I find only two instances in the six years where he started work flying out of the UK on a day where he was in South Africa in the morning. 

73.    There were other examples of over-generalisations. The events in issue took place approximately 10 years ago and (as he himself accepted in cross examination) Mr Grace appeared to be seeing the past with his knowledge of the present.  I preferred to rely on his diaries and log books and his more contemporaneous evidence given in his interviews with HMRC in 2000 and 2003. 

SPC 23  - Pattern of life in UK

74.    In SPC23 Dr Brice recorded:

“On the evidence before me I find that the pattern of the Appellant’s life after 1 September 1997 was that the long haul flights he made would last about four or five days.  For two or three days before or after each flight he would stay in the United Kingdom.”

75.    At the hearing before me this was clarified.

76.    The terms of his licence at the time in question required Mr Grace to fly every 28 days, and if he did not he had to practice in a flight simulator.  To avoid doing this, he tried to ensure he worked every 28 days.  It was therefore predictable that he was most likely to be in the UK at least once a month either to work or (rarely) to practise in the simulator.

77.    It was a requirement of his licence that he had to spend 2 days and 3 nights resting locally after every 13 days of work and if he was in the UK when these rest days fell, he had to stay at Horley.  He would also stay in the UK if he had less then 5 days between work trips.  If he was on standby (but this did not happen often) he had to be within 2 hours of the airport car park.  Horley was sufficient to meet this requirement.

78.    From the tables and Mr Grace’s diaries, I find that for most flights he would arrive in the UK at least the day before he flew out on work.  It is not the case that Mr Grace spent 3 days before and after every flight in the UK and SPC23 should not be read as implying this.  I discuss the pattern of his stays in the UK in more detail in the section below on day count.

SPC18-20:  The day count and tables

79.    In SPC 18 and 20 Dr Brice recorded two opposing day counts for the first 3 of the 6 years in dispute.  The table in SPC18 records days spent in the UK and days spent in South Africa by Mr Grace and were compiled by Mr Grace from his diaries and log book.  He kept the diaries as HMRC in their notice IR20 recommended that a person who had been resident but was now claiming to be non-resident should do so.

80.    In SPC 20 Dr Brice recorded HMRC’s opposing day count, which did include Mr Grace’s days of arrival and departure and days of sickness in the UK.  As recorded in SPC21, Mr Grace did not dispute the accuracy of the calculation on this basis.  At the hearing in front of me, Mr Gordon pointed out that Mr Grace did not accept that HMRC’s basis of calculation was correct.

81.    The day count was an area of primary fact finding by Dr Brice which I did give leave to be reopened.  Not only were the parties quite divided on the issue, the tables gave different results and it was not clear to me that Dr Brice did find that one table was to be preferred over the other (this may well be because on the basis of other evidence she found Mr Grace was not resident in the UK, even on the assumption HMRC’s table was to be preferred).

82.    The day count evidence in front of me was in the form of coloured charts giving (in pictorial form) the day count for all 6 years under appeal.  The evidence for the last three years had not been in front of Dr Brice.  The charts were said to be compiled on the same basis as the day count tables in front of Dr Brice.

83.    As Mr Grace did not accept that HMRC’s charts were a correct representation of his presence in the UK, and vice versa, and the results from the two charts were very different, I have considered them in detail.  I do not consider either chart gives an entirely accurate picture of Mr Grace’s presence in the UK or in South Africa and I explain this below.

84.    Basis of Mr Grace’s tables.  In SPC 19 Dr Brice records that the Appellant’s day count for the UK in SPC 18 excluded days of arrival and departure in the UK, days where he arrived and left the same day, and days of sickness in the UK.

85.    At the hearing in front of me Mr Gordon explained that this methodology was the one recommended by HMRC in IR20 (as it was at the time). I accept Mr Grace’s evidence that he thought he was following IR20 in compiling his tables.  In particular, the guidance in IR 20 said to ignore days of arrival and departure and days of enforced presence due to sickness. (In passing I note that in his closing submissions to me Mr Gordon said that the Appellant had counted days of arrival and departure in the UK as half days in his tables but I find this is not the case:  no half days are shown on the Appellant’s tables and it is clear from looking at the diary that days of arrival and departure from UK are not shown as days in the UK on the tables)

86.    Mr Grace’s table for the 6 years produced at the hearing before me also excluded days spent in the UK on Standby and Training, as well as sickness and days of departure and arrival.  When counting his days in South Africa he included days of arrival and departure (on the basis that they were not spent in the UK).  He also included as days spent in South Africa those spent in South Africa on work (it was his evidence (which I accept) it was his practice to go to his home in Cape Town rather than spend the time in the crew hotel).

87.    Days travelling:  I consider that, as Mr Grace’s charts purport to compare days in the UK to days spent in Cape Town, he should exclude days travelling to and from Cape Town as well as to and from the UK.  They should be prepared on the same basis so like can be compared with like.  In fact, as mentioned above, his charts show days travelling to and from South Africa as whole days in South Africa. 

88.    HMRC’s charts include days travelling:  so days travelling to and from UK (except to and from South Africa other than for work) are shown as days in the UK.  Days travelling to and from Cape Town (other than for work) are shown as being whole days in Cape Town which means (perhaps inadvertently) HMRC’s count has been on this point at least favourable to the Appellant.

89.    I think Mr Grace was right to count days at his home in South Africa as days in South Africa when he was there for short periods between flights and “working” in the sense he would have been putting up at a crew hotel had he not had his Cape Town home to stay in.

90.    Return international flights:  Mr Grace made the point in the remitted hearing that HMRC’s charts contained an inaccuracy in that they showed him present in the UK for a ½ day wherever he flew from an international airport to London.  However, this did not allow for the fact that many of the flights back to the UK made by Mr Grace were over night and would have arrived the day after departure meaning that Mr Grace had no presence in the UK on the day of departure from the international airport.  His evidence was that this was true on all flights except those returning from Osaka, Seoul, Tokyo, Los Angeles (some), Houston (some) and Mauritius.  I accept Mr Grace’s evidence on this.

91.    Miscounted days:  Another error alleged by Mr Grace was that for year 2000/01 Ms Means (who had compiled the tables for HMRC) had shown 4-13 September and 29 September-5 October as being days spent in the UK whereas Mr Grace’s contemporaneous diary records these days as being  “O” which according to the key means “Out UK”.  HMRC disputed that (a) these were days spent outside  the UK and (b) even if they were spent outside the UK there was nothing to show they were spent in South Africa as now claimed by Mr Grace.

92.    HMRC pointed out that in all other cases in his diary he notes “home in CT” if he is in South Africa between trips, or his location if not in South Africa (such as “Barcelona” or “Los Angeles”).  In fact, I find HMRC had not noticed the discrepancy before the hearing as Ms Means admitted that she had not read the key which explained what “O” meant and had prepared her table relying on Mr Grace’s record of his location in another column.  At the hearing Ms Means suggested the Appellant had made a mistake in listing “O” on these days on the basis if he was not in the UK it was his habit to record his location in the right hand column.

93.    HMRC have not suggested any other diary entries made by Mr Grace were made in error and on the balance of probability I prefer to rely on Mr Grace’s contemporaneous record that he was outside the UK than assume he made a mistake.  However, by the same token there is no contemporaneous record that he was in South Africa so I find although he was outside the UK on these days he was not in South Africa. 

94.    Arrival and departure the same day:  Another error Mr Grace identified was that on some occasions he would arrive in the UK in the morning from a long-haul flight for work but then depart the same day for a rest period in South Africa.  HMRC’s tables, he thought, would count this as 1½ days in the UK whereas in fact he only spent a few hours in a UK airport.

95.    I agree with Mr Grace in principle that where he can show he left the UK for South Africa the same day as he arrived in the morning on a return work flight, it should not count as a day spent in the UK.  However, Mr Grace’s contemporaneous diary does not bear out that this happened on more than 2 occasions, because Mr Grace recorded in his diary days travelling to (or from) South Africa as whole days in South Africa.  This was Mr Grace’s evidence and in any event it was borne out from his diaries (eg where Mr Grace landed in the UK after an overnight work flight and then flew to Cape Town later that same day it is shown in the diaries as a whole day in South Africa). Therefore if the day was not shown in his diary as a South Africa day, he was not even travelling to or from South Africa. Although it is possible he flew on overnight flights, I was given no evidence on this.  Therefore,  I do not accept that this point has any impact on his actual day count.

96.    Standby/training days:  I consider that Mr Grace’s day count in the UK should include days spent in the UK on standby or training or in the simulator.  It was his choice to work as a BA pilot which entailed him spending time in the UK on training and on standby. Nor do I accept that the days spent in the UK while grounded (through failing a routine health check) should be discounted.  He had the choice to be in the UK or South Africa and clearly chose to spend some of the time in South Africa:  he returned to the UK for tests because treatment in the UK was both free and quicker than in South Africa.  He chose to be here. 

97.    Sick days: Mr Grace does not consider that days sick should be counted.  His point is that if he had not been sick, he would have been working or in South Africa and in either case not present in the UK.

98.     On the question of principle, I agree that time he would have spent in South Africa but was prevented from doing so by being too sick to travel should not be counted as time in the UK. His presence here in such an instance is truly involuntary. However, I do not agree that time spent in the UK because he was too sick to work should not be counted as time in the UK.  It was his choice to take on employment which required his presence in the UK at the start (or end) of each flight, making it inevitable that if he was too sick to fly he would stay in the UK.

99.    In any event, putting aside the question of principle, I find that of the 8 occasions he was sick in those 6 years, he has only satisfied me that on one occasion (June ’98) he would not have been in the UK in any event. 

100.This is because of the 8 occasions he was sick in those 6 years, I find on all but two occasions the length of the break between work flights means more than likely he would not have been in South Africa if not sick:  it was not clear if he would have been flying on work if not sick and in cross examination Mr Grace seemed to accept that he might well have been in the UK in any event. On one of those 6 occasions, in June 1998, it was his evidence that despite the shortness of the break, he would have been in South Africa as he had been invited to a bachelor party. With respect to the 2 longer breaks, on one occasion he had to stay in the UK to be signed off as part of his job and I find this means he was in the UK by choice (as it was his choice to be a BA pilot).  On the other occasion, Mr Grace was unable to recall what he would have been doing but for the sickness.

101.In conclusion I find days spent sick in the UK should be counted as UK days except in respect of June 1998.

102.Actual day count  Taking the two opposing tables, and applying the principles as I have set out above, I find that Mr Grace’s presence in the UK and South Africa excluding days travelling (whether on work, to or from the UK or to and from South Africa) is as follows:

 

	UK	Cape Town
Part year to 5 April 1998	46	75
1998/1999	82	94
1999/2000	85	107
2000/2001	128	53
2001/2002	96	102
(part year) 2002/2003	39	27

 

103.As days of departure and arrival are excluded, this rather underestimates presence in the UK and South Africa.  Both parties seemed agreed it would be fairer to include half a day for a day that Mr Grace left or arrived in the UK or South Africa.  The effect of this I find increases the day count as follows:

 

	UK	Cape Town
Part year to 5 April 1998	62	85
1998/1999	114	104
1999/2000	115	118½
2000/2001	165	64½
2001/2002	127	110
(part year) 2002/2003	51	28½

 

104.Relevance of day count

105.Both parties were agreed that the count of days actually spent by Mr Grace in the UK is not decisive of the issue of residence and I agree. It is not a numbers game. As  the Court of Appeal in Grace at 6(iii) and paragraph 7 said, time spent in the UK was a factor to be considered together with other factors. 

106.The emphasis on day count between the parties possibly arose because of IR 20 with its (arbitrary) rule that an a presence of less than an average of 91 days per tax year would mean a person who had left the UK for a settled purpose would cease to be resident here.  The 91 days rule has no basis in law.

107.In any event when considering Mr Grace’s actual day count it has to be borne in mind that Mr Grace’s lifestyle involved him spending substantial parts of any year in the air or staying in a crew hotel somewhere in the world that was neither the UK nor South Africa.  Like the master mariner in In re Young (1875) 1 TC 57 a low day count does not necessarily preclude residence in the UK when the rest of the year is spent on the high seas (or in the air).

108.I find the day count is of more relevance as a way of comparing days spent in the UK to days spent in Cape Town. 

109.The comparison shows that most years Mr Grace spent a little more time in Cape Town than in the UK.  Year 2000/01, which was the year of his grounding and relationship with A (as to which see below), was an exception as he spent twice as much time in the UK than Cape Town.  Because of year 2000/01, overall for the six years the time spent in the two places was about equal.

110.Miss Simler’s view was that the charts were more useful as they show the pattern of Mr Grace’s visits to the UK.  That pattern is of predictable and frequent short stays.  If Mr Grace finished a work flight and went to South Africa, the pattern is of a short stay in the UK: overnight or for at most 2 or 3 nights.  If, however the interval between work flights was short, Mr Grace stayed in the UK the whole time and this might be for a day or two to or very occasionally as long as 8 days although 4 or 5 days was the more average period.  There are some longer stays particularly in 2000/01 which coincided with his relationship with A, and then right at the end of the tax year with his being grounded.  As Dr Brice recorded at paragraph SPC 22, the Appellant claimed to have only spent more than 7 consecutive days in the UK on 3 occasions during the 6 years:  from the tables I find this is true if (as Mr Grace did) days of sickness and grounding and days of departure and arrival are excluded.

111.Another factor which is apparent from the tables is that (as Mr Grace said) he chose to work more during the (UK) summer months to maximise his time off in Cape Town during the UK winter (which was of course the South African summer).  Therefore, the UK summer months show greater UK presence and fewer if any visits to South Africa.  The UK winter months show fewer trips to the UK than the summer and a much greater presence in South Africa.

112.Mr Grace’s presence in South Africa was in fewer but much longer blocs:  this is recorded at SPC22 and reflected in the tables.  The tables show that Mr Grace (except when working) never spent less than 7 consecutive days in South Africa.  Mr Gordon’s point is that the lengthy stays in South Africa gave Mr Grace time to “live” his life rather than merely “killing time” as he was doing in his Horley house between, before or after flights.

Girlfriends

113.I admitted in evidence the original notes of Mr Grace’s meetings with HMRC in 2000 and 2003 and HMRC cross examined him on these with particular reference to his girlfriends.  This was not an area on which primary facts were found by Dr Brice but clearly relevant before me as it was the Appellant’s case in the 2010 hearing that he had no social life in the UK.

114.Mr Grace had two relationships during the periods under review. He clarified that these were not with “S”, the lady he had in 1997 been planning to marry and the breakup from whom, mentioned at SPC10, caused him to change his life’s direction and buy a home in South Africa.

115.He had a relationship with “J” from 1998-2000.  She lived in the Horley house.  She lived there by herself if the Appellant was not there or together with the Appellant when he was there at the same time.  She was an air hostess on a 75% contract meaning she worked 3 out of 4 weeks. 

116.His evidence was that J tried to spend as much time in South Africa with him as possible and really regarded the apartment at Greenways in Cape Town as their home together rather than the Horley house.  He tried to arrange his work schedule around hers (which was fixed) to maximise their time together in Cape Town.

117.He then had a relationship with “A”.  This lasted for about 8 months to a year in 2000 and the start of 2001.  It was serious while it lasted in that Mr Grace contemplated giving up his home in South Africa and buying a house with A in Seaford to live as a family with her children from a previous relationship.

118.A did not like to travel to South Africa and it was Mr Grace’s evidence that at the time of his relationship with her he spent more time in the UK than usual.  This is borne out by both his and HMRC’s day count figures for 2000/01.

119.Mr Grace said one of the causes of the break-up with A was his choice to spend his rest time in South Africa rather than with her in the UK.  He also explained the break up was in part the cause of the stress behind his failing the routine health check & led to his grounding in February through to the end of April 2001.  I accept his relationship with A broke down at the end of 2000 or beginning of 2001.

HMRC’s submissions

120.In Miss Simler’s view the re-opening of some of the primary findings of fact had not really changed the position from that in front of Dr Brice, although to the extent it had changed she thought the facts were stronger in favour of UK residence.

121.It was Miss Simler’s position that this Tribunal should pay close attention to the facts as found by Dr Brice, but for the law I should look to the High Court and Court of Appeal decision and Dr Brice’s summary of the law in Shepherd which was described as “impeccable” by Lewison J in paragraph 45 of Grace at the High Court.

122.Miss Simler says that there are two main reasons why we should conclude Mr Grace is resident. Firstly, he has a house here available for his use and he does use it regularly.  Secondly, he has his employment here and therefore chooses to be present in the UK to carry out his employment.

Appellant’s submissions

123. It is Mr Grace’s case that he was resident up to September 1997 but then ceased to be resident.  He continued to return to the UK to perform the duties of employment, but the quality of his presence in UK was not such as to amount to residence. He sees himself as a resident of South Africa commuting to work in the UK. 

124.Mr Gordon says that in September 1997 Mr Grace severed his links with the UK sufficiently to amount a distinct break and a cessation of residence:  there was a wholesale relocation of Mr Grace’s life to South Africa.  It is the Appellant’s case that the UK is no longer his settled or usual abode and his does not “live” here.  He has no ties here.  South Africa is the focus of his life.

My conclusions

Nature of Appellant’s presence in UK

125.Mr Grace was present in the UK for short, but frequent periods.  He used his seniority in British Airways to maximise the time he could spend out of the United Kingdom and in South Africa.

126.Although it is the Appellant’s case that he spent all his leisure time in South Africa, I find much of the time spent in Horley was leisure time because when Mr Grace was working (ie flying) he was out of the UK.  It was leisure time he either had to spend in the UK because of the regulations on rest periods or that he chose to spend in the UK because the interval between work flights was too short in his view to justify a trip to South Africa.

127.Mr Gordon makes the point that although in Lysaght it was held short but regular periods of presence in the UK could amount to residence, nevertheless Mr Lysaght’s visits were twice the length of Mr Grace’s.  I am bound by the view of the Court of Appeal at CA40 where they said in reference to this case “such regular periods of physical presence may amount to residence….” and conclude that it has to be looked at in the round.  Short visits may amount to residence if they are very frequent as in this case:  short, infrequent visits are unlikely to amount to residence.

The Horley House

128.It was Mr Grace’s case that his Horley house was like a crew hotel to him:  he rested between flights and checked up on his emails.  The only difference, he said, was that in Horley he would be able to check his post.  He said he had no quality of life in the UK:  all he was doing was resting and “killing time.”  He slept, he watched TV, used the internet and went for walks in the local area.

129.I cannot agree that he treated his Horley house just like a hotel.  He kept his car parked there even when he was out of the country.  He paid council tax and received mail.  He owned the furniture in the house and was surrounded by his personal possessions. When in Horley he did his washing and went out shopping.  He read his post and caught up on his paperwork.  He had exclusive possession of the house (even though for a period his girlfriend lived with him).

130.Miss Simler’s point that it would in any event be an unsustainable conclusion that Mr Grace was not resident in the UK just because his Horley house was more like a hotel to him:  living in hotels does not prevent a taxpayer being resident (see for instance CA 24).  Mr Gordon accepts this but considers treating a house as a hotel makes it less likely a person is resident.  I agree but the point is immaterial because I have found that Mr Grace’s house in Horley was more than just a hotel to him.

131.Was the Horley house a home to Mr Grace?  I am inclined to the view that a finding Mr Grace had a home in the UK is akin to a finding he was resident here, and so I put this issue to the side for the moment while considering all the relevant factors, as identified by the Court of Appeal and set out in paragraphs 18 above.

Social life and hobbies

132.It was Mr Grace’s case that he had no social life or hobbies in the UK and therefore he was not resident here.  Mr Gordon’s view was that his presence did not have the quality of residence. Mr Grace did not go to the cinema or pubs or have friends here.  In contrast, his life in South Africa was gregarious and that was where he kept his aeroplanes and belonged to flying clubs.  After 1997, friends and family would visit him in South Africa and not in the UK.

133.HMRC disagree with this on both facts and law.  They consider he clearly did have a social life of some sort in the UK as he had two girlfriends one of whom he only saw in the UK.  And as a matter of law HMRC do not consider that residence is dictated by social life.

134.I find that (except for 2000/01 when he was with A) Mr Grace did not have much of a social life in the UK nor did he have hobbies here and this was in marked contrast with his life in South Africa. It was not in marked contrast with his life in the UK before September 1997:  Mr Grace’s evidence was that before this time his social life in the UK had similarly revolved around his then girlfriend.  I agree with Miss Simler, however, that how a person chooses to spend their leisure time, whether staying in, doing the washing  and watching TV (as Mr Grace did in the UK) or going out and having an active social life (as Mr Grace had in South Africa), is unlikely to be determinative of the question of their place of residence.

135.Mr Gordon’s point is based on the contrast between Mr Grace’s life in the UK and South Africa.  I find such a contrast is inevitable where a person is based in one country for purposes of their business or employment, and is based in another country for leisure.  It is clear on the authorities that a person can be resident somewhere if present there solely for the purposes of work and with a very different quality of life to the one they have at home in another country:  Lysaght.  So I bear the difference in mind but do not consider it conclusive.

His home in Cape Town

136.Miss Simler’s case is that the fact Mr Grace has a home elsewhere is largely of no consequence.  Mr Grace’s case is that time he spent in South Africa was the focus of his life and his house in Cape Town was his true home.

137.I have already quoted at the end of my paragraph 8 Lloyd LJ’s comments in  CA 8 on the relevance of another home:

“….the proposition that a home elsewhere is of no consequence is not to be understood as meaning that the other home is entirely irrelevant to the necessary enquiry.  That would be inconsistent with the obligation to take into account all the facts of the case.  However, the existence of another home is not decisive, because of the possibility of simultaneous residence in several places.”

138.I find that Mr Grace had a home in Cape Town.  That is relevant to, but very far from decisive of the issue of whether he was resident in the United Kingdom.  As Lewison J said, the Tribunal should not search for the “real” home as that is a quest for domicile. 

139.I also note that it is implied in Mr Grace’s case that South Africa is where he chooses to spend his leisure time.  But I find that that is not entirely the case:  when Mr Grace decided (as according to the tables he did on many occasions) that the gap between work flights was too short to fly back to South Africa, he was choosing to spend leisure time in the UK.

Employment as a BA pilot

140.In respect of s336 Lewison J (HC36) concludes (as does the CA) that Dr Brice made an error of law in concluding that Mr Grace’s presence in the UK was for a temporary purpose because it was for the purposes solely of his employment:

“….Performance of his duties under this contract of employment was part of his settled pattern of life…..presence in the UK in order to fufil duties under a permanent (or at least indefinite) contract of employment cannot be described as casual or transitory.  Standing in any of the years of assessment the objective observer would have known that Mr Grace would continue to be present in the UK to fulfil those duties in subsequent years, unless and until he changed jobs or retired.  The recurrent nature of his regular presence in the UK leads inevitably to the conclusion that his purpose for being here is neither casual or transitory. It simply cannot be described as a temporary purpose.”

141.The Court of Appeal ruled in paragraph 40:

“…. the court [ie the High Court] can decide (as I would) that the appellant’s presence in this country in order to perform his tasks as a BA long haul pilot, with whatever regularity and length of stay this is involved, using the house which he has retained in Horley, is not such as to qualify as presence “for some temporary purpose only”, so as to come within s336……”

142.Miss Simler is also making the point that not only is his employment not a temporary purpose, it does not make his presence in the UK involuntary.  Far from it:  it is his choice to work as a British Airways pilot and that requires his presence in the UK.  This is also a finding of law made by Lewison J at paragraph 41:

“…the principle [is] that a person’s residence may be dictated by the exigencies of work.  This does not make it in any sense involuntary.  After all, the fact that Mr Grace works as a pilot for British Airways (which in turn requires him to work on flights originating and terminating in the UK) is entirely his choice.”

143.It is clear from the House of Lords’ decision in Lysaght (as discussed above in paragraph 22) that a person can be resident in the United Kingdom even if the only reason they are here is for the purposes of their employment or business.

144.In Grace at CA39 the Court of Appeal make the point that employment is an important factor but not decisive of residence (this is clearly the law else the case would not have been remitted):

“…It seems to me that it would be wrong to treat the Appellant’s presence for the purposes of his employment as a factor which necessarily shows residence. It may well be a strong pointer in that direction, but [other decisions] show clearly the need to take into account, weigh up and balance all relevant factors. I do not think it would be right to regard Mr Grace’s presence in this country in order to perform the duties of his employment as a trump card which of itself concludes the issue in favour of residence.”

145.Mr Gordon also cites the case of Abramovich as showing that employment in the UK does not necessarily result in residence here and that Mr Abramovich’s stays here were often longer than Mr Grace’s.  Miss Simler points out that Clark J in that case regarded the Appellant in that case as being present here for the purposes of his expensive hobby (ownership of a football club) rather than for employment.  This does not affect the point of law that employment in the UK does not necessarily mean a person is resident here.

146.Mr Gordon also made the point that most of Mr Grace’s work was performed outside the UK.  Mr Grace would fly planes out of the UK on long haul flights and only bring them back again a couple of days later.  This is a valid point and the day count inevitably reflects this:  work days are not counted as days in the UK (barring a half day on arrivals and departures in my second table at paragraph 103).

147. So (largely) the question before me is not whether Mr Grace was resident in the UK because of his presence here when he was working but whether he was resident in the UK because of his presence here when he was not working. 

Ties to the UK

148.Mr Grace has no family here (or at least no family with whom he is in contact).  He was not born here, he was not educated here, he is not a full British Citizen and he does not intend to retire here.  It seems very likely (as he says) that he is not domiciled here.

149.However, it is not the case that during the 6 years in question Mr Grace had no ties in the UK: for part of those years he had UK girlfriends (albeit with J the relationship was largely conducted in South Africa).  It is also the case that his lack of ties did not prevent his residence here before September 1997.

Other decided cases

150.Mr Gordon compared the facts of Mr Grace’s life to those of Appellant’s in other cases and his conclusion was that they indicated that the Appellant was not resident.  Looking first at the cases where the taxpayers were found to be resident, Mr Gordon concludes as follows:

151.Shepherd:  the taxpayer spent more time in the UK than Mr Grace, had more social life here, had family here and only rented his accommodation abroad and had left for tax reasons.

152.Lysaght:  Mr Gordon sees this as a borderline case and one in any event in which the taxpayer’s visits to the UK were for a longer duration than Mr Grace’s.

153.Levene:  the taxpayer spent 4 to 5 months here each year;

154.Cooper v Cadwalader (1904) 5 TC 101:  continuous occupation for two months of a year (for many years) of a house treated as a home.

155.Taking the cases where the taxpayers were found not to be resident, Mr Gordon concludes that these also point to Mr Grace not being resident:

156.Abramovich:  the defendant made frequent, short visits to the UK and owned accommodation available for his use, had few ties here and visited for the purpose of his ownership of a football club.

157.On Combe, Zorab and Brown Mr Gordon’s main comment was that these appellants were all present in the UK for longer periods than Mr Grace.

158.At CA 3 Lloyd LJ said

“The issue of residence in the UK only arises in a case in which the person in question spends time outside the UK.  The circumstances in which he or she does so, and the pattern of, and reasons for, time being spent in the UK and elsewhere may be infinitely various.  Decided cases illustrate a great variety of examples, and the result of one case cannot normally be used as a guide to how another should be decided, even if the two have some factors in common.”

159.I think trying to compare Mr Grace’s case to the Lysaght case shows how difficult such comparisons can be.  Mr Gordon says it was a borderline case because one judge dissented, and 1 of the majority of 4 judges indicated that although while he agreed there was evidence on which the Special Commissioners  could have reached the conclusion they did, he was not sure he would have reached the same conclusion. And Mr Gordon says it was a stronger case for residence than Mr Grace’s because Mr Lysaght had family and friends in UK and his stays were longer.  However, by the same token, HMRC points out that Mr Grace’s day count even ignoring days of arrival and departure were (as found by me) similar, his visits to the UK were much more frequent and unlike Mr Lysaght he owned and stayed in his own house here. 

160.Mr Gordon’s case is that Mr Grace’s day count in the UK, particularly if days of arrival and departure are excluded, is not particularly high.  He can point to a number of cases where the Appellant’s day count was higher than in this case, such as Combe and Zorab and yet the Appellant was found not to be resident.  The day count in Brown  was 142-87-109-115-78 and Mr Brown was found to be non-resident.

161.The day count in Combe (with more similar facts to this case) was 52-175-181 days over the three years.  In Zorab the appellant was often in the UK for 5 to 6 months at a time.  The defendant in Abramovich had a similar day count to Mr Grace as well as owning a house for his use and having a business-cum-hobby in the UK.

162.However, lower day counts do not preclude a finding of residence.  In the Lysaght case the Appellant’s day count was 101, 94 and 84 days per year in the UK and may have been the origin of the 91 day rule in IR 20.  He was found to be resident.  Similarly the taxpayer in Cooper v Cadwalader appears to have had a day count of only about 61 days per year but was found to be resident.

163.In considering Mr Grace’s day count I bear in mind that this is in the context of a person who spends a considerable part of the year in the air or in crew hotels in foreign cities.  Even on his own counts, he spends between a third and half a year neither in the UK nor in South Africa.

Distinct Break

164.As mentioned above in paragraph 64 I do not consider myself bound by Dr Brice’s finding that there was a distinct break and consider the question afresh on the basis of the primary facts.

165.It is the Appellant’s case that in September 1997 there was a distinct break in his life.  He set up home in South Africa, established an active social life there and only commuted to the UK for the purposes of his employment.

166.Miss Simler’s point is that there was no distinct break with UK:  Mr Grace did not sever ties, she said, as he did not have any other than his house and his job and those he kept.

167.I find that the main change in Mr Grace’s life in September 1997 was a distinct decrease in amount of time spent in UK and the creation of new ties in South Africa.  Is this a sufficient break with the UK?

Conclusion

168.It is for the Appellant to demonstrate to this Tribunal that, having been resident in the UK for some years up to September 1997, he then ceased to be resident here.

169.HMRC thought it was legitimate to compare Mr Grace to a person resident in London during week days for the purpose of their business or employment but who returns to their home in the country at weekends and is also resident there.  Mr Grace thought it was legitimate to see him as someone who lived abroad and merely commuted into the UK to work.  Neither comparison is entirely apt as, as already stated, Mr Grace was not present (or only briefly present) in the UK when working as it was his job to fly planes out of the UK.  The greater part of his time spent  in the UK was enforced rest days and short intervals of on average 4-5 days between work flights.

170.I consider the Court of Appeal’s criteria for determining residence. Under (i) and (iv) I find Mr Grace’s presence in the UK was a permanent feature of his life (although not continuous).  Because of his employment he was predictably staying at his house in Horley once a month, and normally more often than this.  I find he had a settled abode in the UK.  Under (ii) his presence in the UK was not a stop gap measure: it was indefinite while his employment with British Airways continued. Under (xi) he had the expectation of continuity of presence in the UK (which was realised as Mr Grace is still a pilot with BA and still has his house in Horley). 

171.Under (iii) I considered the time he actually spent in the UK in absolute terms and find it is within that very broad spectrum of time spent which is both higher or equal to time spent in cases where residence has been found, and yet lower than in some other cases where residence has not been found.  In short, it does not guide me to a conclusion on the question of Mr Grace’s residence. I consider it in comparative terms:  he spent on average about as much time in the UK as South Africa where he does consider himself to be resident.

172. Under (iii) and (v) I consider the nature of his presence:  short, frequent and predictable stays in the UK throughout the year (although fewer stays in the winter) to enable him to work.  I consider his connections here:  he had no family connections in the UK that he maintained, although he had girlfriends here for some of the time in issue.  His employer is based in the UK.  This is clearly a very significant connection to him as I find he would not come to the UK at all were it not for his job. 

173.Under (vi) and (viii) I take into account that he has a house in South Africa where he spent roughly an equivalent amount of time to the time he spent in the UK and that he regards South Africa as the focus of his life.  But I note (ix) the fact that although Mr Grace sees Cape Town as his real home this is far from conclusive.  I take account of the differing nature of Mr Grace’s life in South Africa and the UK but consider it was his choice how to spend his leisure time.  I also note that Mr Grace’s social life in the UK does not appear to be greatly different before September 1997 than after that date.  I consider how he spent his leisure time to be of much less significance than the fact that he chose to spend some of his leisure time in the UK (even if that choice was a choice dictated by his choice of employment).

174.I also take into account the availability of living accommodation in the UK.  As I have said, I think his occupation of his own house gave a different quality to his time in the UK than if he had stayed in hotels.  Staying in hotels is not necessarily incompatible with residence but staying in one’s own house makes it more likely (thought not conclusive) that a person is resident.

175.The Appellant sees himself as merely physically present in UK for purpose of job and that in September 1997 there was a wholesale relocation of his life to SA.  I cannot agree. A very important part of his life, his employment, remained in UK.  When staying in the UK he was much more than a visitor:  he had a settled and regular presence here staying in his own house that had been his only home up to September 1997 and I find continued to be a home after that date.

176.Under (xiii) I do not consider that Mr Grace has demonstrated a sufficient break.  The time Mr Grace spent in the UK must be a little less than half the time before September 1997 (bearing in mind that time now spent in Cape Town would before September 1997 have been spent in the UK).  But I find this is not enough to amount to a definite break with the UK.  He did create new ties elsewhere but he did not sever his main ties (employment and house) with the UK.  Taking into account all factors, but giving greatest weight to his employment and home here in the UK and the amount of time actually spent here together with the frequency of his short visits, I am in agreement with Lewison J that in September 1997 Mr Grace went from being a person resident in one country to being a person resident in two.

177.I conclude that Mr Grace was resident in the UK for the 6 years in issue (1997-2003).  It follows, as it was both conceded and as I find Mr Grace did have a settled purpose to his residence in the UK, that he was also ordinarily resident here.

Postcript on s334

178.I concluded at the start of this Decision that Miss Simler was precluded from arguing s334 applied because of an earlier concession by HMRC that it did not apply.  That decision by me is otiose in any event because I have concluded that Mr Grace was resident in the UK.

179. Nevertheless, for the sake of completeness.  I would comment that I do not find that Miss Simler made out her case on s334. 

180.Miss Simler cited paragraph 555B of Reed v Clark 58 TC 528 at 555B where Nicholls J said:

“On that basis it seems to me plain that a British resident’s departure abroad for a period of a few weeks or months with the firm intention of returning at the end of the period to live here as before would be likely always to be for the purpose only of occasional residence”. 

181.However, this was said in the context of someone leaving once for a few weeks or months intending always to come back and pick up full-time residence here at the end.  This is quite different to Mr Grace, who, although he always intended to return to the UK after each stay in South Africa, also intended to return to South Africa after each stay in the UK.

182.Nicholls J in that case regarded “occasional residence” as the antithesis of “ordinary residence”.  He cited Lord Scarman in R v Barnet London Borough Council (ex parte Shah) [1983] 2 AC 309 at page 343-4 for the meaning of “ordinary residence” as:

 “a man’s abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being whether of short or of long duration”. 

183.That seems to me to be a good description of Mr Grace’s abode in Cape Town:  it was adopted voluntarily and for a settled purpose as part of the regular order of his life.  It was therefore not an occasional residence and s334 would not bite.  However, this is irrelevant in view of my decision that Mr Grace never ceased to be resident in the UK.

184.This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

 

 

Barbara Mosedale

 

TRIBUNAL JUDGE

RELEASE DATE: 5 January 2011