HMRC clarify a confusing residence case. Or do they?

We reported in January that HM Revenue & Customs (“HMRC”) appeared to deviate from the well-established tests for UK residence set out in IR20, citing that many factors must be taken into account when determining UK tax residence, not just days spent in the UK. The Special Commissioners agreed. However, it seems that HMRC may be back-tracking.
In summary, in the Gaines-Cooper case, HMRC argued that because Mr Gaines-Cooper retained sufficient ties to the UK, he was to be considered UK tax resident, regardless of the number of days he spent in the UK. This contradicted HMRC’s own publication, IR20, which focuses on the number of days spent in the UK as being the determining factor to assess UK tax residence.

Residence tests

As a reminder, under IR20, people who wish to be considered non-UK resident must not spend more than 183 days in any tax year (6 April – 5 April) in the UK. Over four years, the average number of days per tax year must not exceed 90 (the “90 day rule”). Since 1993, HMRC has ignored the days of arrival and departure into and out of the UK in calculating the total.

The effect of being non-UK resident is that a charge to UK tax only arises in relation to income arising in the UK, rather than on world-wide income (special additional tax rules also apply where an individual is not UK domiciled).

New HMRC guidance

HMRC published clarificatory guidance earlier this year in HMRC Brief 1/2007, which makes it clear that they do not consider that there has been a change in practice as regards the “90 day rule” (see above). In the guidance, HMRC distinguish the Gaines-Cooper case where, they say that, having regard to his lifestyle and in particular to time spent by him in the UK and overseas, Mr Gaines-Cooper never left the UK, therefore the 90 day test was not applicable.

They go on to say that: “The guidance provided by booklet IR20 is general in nature. If, on the facts of a matter, a dispute arises over the application of this general guidance and the parties cannot resolve their dispute by agreement, the Commissioners will determine any appeals. The Commissioners are bound to decide the legal issues by reference to statute and case law principles, rather than HMRC Guidance. Where a dispute relates to particular facts the Commissioners will determine the evidence and make findings of fact to which they will apply the law”.


In most cases HMRC will continue to follow their own guidance set out in IR20. Where there is a dispute and this dispute goes before the Special Commissioners, other factors can be taken into account. It would seem that it is unwise to rely solely on IR20 without taking into account other relevant factors.

On a slightly tangential note, HMRC has confirmed that the domicile and residence review is still on-going. They have confirmed that they continue to work on revised guidance which will be tailored to specific customer groups. This will range from very basic guidance on residence issues to technical guidance for practitioners in this area, giving guidance on HMRC interpretation. The guidance, when published, will be available online. It is expected that the guidance will be published later this year.