Key Facts
- •Mr. McCabe, founder and CEO of Scarborough Property Group, relocated to Brussels from the UK on April 4, 2006, for business and tax planning purposes.
- •HMRC issued closure notices amending his tax returns for 2006/07 and 2007/08, asserting UK residency.
- •Mr. McCabe argued that he ceased to be a UK resident at common law on April 4, 2006, or was non-resident in the UK under the UK/Belgium DTC.
- •He maintained a home in Brussels and incorporated a Belgian personal service company, but retained significant business interests and family ties in the UK.
- •The FTT dismissed his appeal, concluding he remained a UK resident.
- •The appeal to the Upper Tribunal challenged the FTT's application of the common law residence test and the DTC tie-breaker.
Legal Principles
Common law test of residence: A multifactorial inquiry focusing on whether there has been a 'distinct break' in the taxpayer's pattern of life in the UK. Consideration of physical presence, the nature of presence, connection with the place, and permanence are key.
Gaines-Cooper v HMRC [2011] 1 WLR 2625; HMRC v Glyn [2015] UKUT 551 (TCC); Revenue and Customs Commissioners v Grace [2008] EWHC 2708 (Ch)
UK/Belgium DTC Article 4(2) tie-breaker: If resident in both states, residence is determined sequentially: (a) permanent home; (b) centre of vital interests (COVI); (c) habitual abode; (d) nationality. If none of (a)-(c) apply, competent authorities settle by mutual agreement.
UK/Belgium Double Tax Convention (DTC)
Outcomes
Appeal dismissed. The Upper Tribunal upheld the FTT's decision that Mr. McCabe remained a UK resident for the Relevant Period.
The Upper Tribunal found that the FTT correctly applied the common law test of residence and the DTC tie-breaker provisions. Despite significant changes in Mr. McCabe's life, his ties to the UK were not sufficiently loosened to constitute a distinct break. His COVI remained in the UK due to ongoing business relationships, family ties, and frequent visits.