Kevin McCabe v The Commissioners for HMRC

12 September 2024

[2024] UKUT 280 (TCC)

Upper Tribunal

A businessman moved to Belgium but kept strong business and family connections in the UK. The courts decided he was still a UK resident for tax purposes because he hadn't broken enough ties with the UK, despite living in Belgium. This involved carefully looking at where he spent his time and what his important connections were.

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.

Kevin McCabe v The Commissioners for HMRC

Key Facts

Legal Principles

Outcomes

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