Grace v Revenue & Customs [2008] UKSPC SPC00681 (2 May 2008)

Spc00663

 

INCOME TAX – residence and ordinary residence - Appellant is a British Airways pilot who was born in South Africa but lived in the United Kingdom after 1986  -  in 1997 he purchased a house in South Africa but retained his house in the United Kingdom which he used before and after flights – whether Appellant resident and ordinarily resident in the United Kingdom for the tax years 1997/98 to 2002/2003 inclusive –no – appeal allowed – ICTA 1988 Ss 19(1),  334 and 336 

THE SPECIAL COMMISSIONERS

LYLE DICKER GRACE
Appellant

 - and -   	

THE COMMISSIONERS FOR HER MAJESTY’S 
REVENUE AND CUSTOMS 
Respondents

Special Commissioner: DR A N BRICE

Sitting in London on 29 November 2007

The Appellant in person 

Ingrid Simler QC, instructed by the Solicitor of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

The appeal
1.	Mr Lyle Dicker Grace (the Appellant) appeals against a notice of determination dated 10 June 2004 that the Appellant was ordinarily resident in the United Kingdom for the six years from 1997/98 to 2002/2003 inclusive. The Appellant is a British Airways pilot and receives income from that employment which is paid into his bank in the United Kingdom. 

The legislation 
2.	At the relevant time the relevant parts of section 19(1) of the Income and Corporation Taxes Act 1988 (the 1988 Act) provided:

“19(1)	The Schedule referred to as Schedule E is as follows:

SCHEDULE E
1.	Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which fall under one or more of the following Cases- …

Case I		any emoluments for any year of assessment in which the person holding the office or employment is resident and ordinarily resident in the United Kingdom …  

Case III 	any emoluments for any year of assessment in which the person holding the office or employment is resident in the United Kingdom (whether or not ordinarily resident there) so far as the emoluments are received in the United Kingdom.” 
The issue 3.	The issue in the appeal was whether the Appellant was resident and ordinarily resident in the United Kingdom in the six years from 1997/98 to 2002/03 inclusive.

The evidence
4.	A bundle of documents was produced. Oral evidence was given by the Appellant on his own behalf. The Appellant exhibited some additional documents.. 
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. 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 retuned 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 £250,000 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 moved into a house which 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 of which 
		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.    

The arguments 
24.	The Appellant claimed that he had departed from the United Kingdom on 6 August 1997 to live outside the United Kingdom permanently and that thereafter he was not resident in the United Kingdom. He had removed the centre of his life to South Africa in 1997 since when he had kept his visits to the United Kingdom to a minimum. He kept his private aeroplanes in South Africa and did no private flying in the United Kingdom. He had retained the house in Horley as an investment but could have stayed in hotels. The Appellant did not agree that the South African house was in the nature of a holiday home. He argued that section 334 of the 1988 Act did not apply because he was in the United Kingdom for a temporary purpose only to rest before or after his flights. His visits to the United Kingdom were short and only on three occasions were they longer than seven days. He argued that he was a temporary resident in the United Kingdom within the meaning of section 336 of the 1988 Act and that he had not spent more than six months in the aggregate in the United Kingdom during any of the years in question.  

25.	For the Revenue Ms Simler argued that the Appellant was resident in the United Kingdom The word “resident” was not defined in the 1988 Act and should be given its natural and ordinary meaning relying upon Reed v Clark (1985) TC 528 at 547B. She cited Levene v The Commissioners of Inland Revenue (1928) 13 TC 486 for the principle that the word “to reside” meant “to dwell permanently or for a considerable time”. She cited The Commissioners of Inland Revenue v Zorab (1926) 11 TC 289 for the principle that it was necessary to take into account all the facts of the case. She argued that the fact that an individual also had a home elsewhere was not conclusive as a person could reside in two places but if one was the United Kingdom then he was chargeable to tax here, relying upon Levene at 505 and Cooper v Cadwalader. (1904) 5 TC 101. Ms Simler went on to argue that there was a difference between the case where a British subject had a residence in the United Kingdom and absences from it (as in Levene and in Lysaght v The Commissioners of 
Inland Revenue (1928) 13 TC 511) and a case where the person never had a residence in the United Kingdom (as in Zorab and The Commissioners of Inland Revenue v Brown (1926) 11 TC 292)  Ms Simler relied upon In Re Young  (1875) 1 TC 57 for the principle that absences abroad caused by employment were temporary absences and did not necessarily mean that a person was not residing in the United Kingdom. She argued that intention was not relevant, relying on In re MacKenzie (1941) 1 Ch 69. She distinguished The Commissioners of Inland Revenue v Combe (1932) 17 TC 405 at 410 and 411 on the ground that the Appellant spent significant amounts of time in the United Kingdom. 

26.	Ms Simler also argued that the Appellant was ordinarily resident in the United Kingdom. Ordinary residence required more than mere residence and meant “normal and part of everyday life” relying upon Lysaght at 527-529. Ms Simler also argued that ordinary residence meant a regular and habitual mode of life in a particular place relying upon Barnet London Borough Council v Shah [1983] 2 AC 309 at 310D; she cited Levene at 507 for the principle that ordinary residence connoted residence in a place with some degree of continuity apart from accidental or temporary absences; and cited Shah for the principle that ordinary residence required a degree of settled purpose but that there was no requirement for any deep examination of the mind of the taxpayer. Finally she cited Reed v Clark at 552C and 554 E-F for the principle that it was possible to be ordinarily resident in a year of assessment in which the taxpayer was not resident.

27.	Turning to section 334 Ms Simler argued that the Appellant was a Commonwealth citizen who had been ordinarily resident in the United Kingdom and that section 334 applied. She cited Levene and Reed v Clark at 555B for the principle that, in the absence of a distinct break, any periods of residence abroad were to be treated as for the purpose only of occasional residence abroad. 

28.	Finally Ms Simler argued that the Appellant was not a temporary resident in the United Kingdom within the meaning of section 336. With regard to section 336(2) Ms Simler did not suggest that the Appellant had spent in the aggregate at least six months in the United Kingdom in each year of assessment but did argue that the Appellant was not in the United Kingdom for a temporary purpose only and had the intention of establishing his residence there. She cited Cadwalader at 107 and 109 for the principle that temporary purpose was the opposite of continuous and permanent residence and was casual or transitory residence as distinguished from habitual or permanent residence. She argued that the Appellant had established his residence here and maintained it and was in the United Kingdom regularly and repeatedly for the settled purpose of earning his living. The fact that the time spent by the Appellant in the United Kingdom was relatively short had to be considered within the context of the fact that he spent much of his time in the air.  

Reasons for decision
29.	The issue in the appeal was whether the Appellant was resident and ordinarily resident in the United Kingdom in the six years from 1997/98 to 2002/2003 inclusive.

30.	I first consider whether the Appellant was resident in the United Kingdom in the light of the principles established by the authorities. Next, I consider whether the Appellant was ordinarily resident. Finally, I consider the application of sections 334 and 336 of the 1988 Act before reaching a final decision.

Was the Appellant resident?
31.	The first authority cited by Ms Simler is Young (1875) which is a judgment of the Court of Exchequer (Scotland). It concerned a master mariner who sailed between Glasgow and the Mediterranean and New York. Although he had a house for his wife and family in Glasgow he was only in the United Kingdom for 88 days in the relevant year of assessment. It was held that he was resident in Great Britain; his absences were temporary absences and he was actually residing in Glasgow. Ms Simler relied upon Young for the principle that absences abroad caused by employment were temporary absences and did not necessarily mean that a person was not residing in the United Kingdom. However, the facts in Young can be distinguished from the facts in the present appeal because in Young the taxpayer had only one residence, which was in Glasgow, and all his absences were for the purpose of his trade. 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.  

32.	Cadwalader (1904) was also a judgment of the Court of Exchequer and concerned a citizen of the United States who resided in New York. He took a lease for three years of a house and shooting rights in Scotland and the lease was later extended to six years. The taxpayer lived at the house continuously for two months each year. He was held to be resident in the United Kingdom. At 105 the Lord President referred to the lease and to the occupation which was “not casual or temporary but substantial and continuous”.

33.	Ms Simler relied upon Cadwalader for the principle that the fact that an individual had a home outside the United Kingdom was not conclusive as a person could reside in two places but, if one was in the United Kingdom, then he was chargeable to tax here. In considering the application of Cadwalader to the facts of this appeal I bear in mind that it was decided before the enactment of section 336(3) in 1993.  I consider the application of section 336 later.  

34.	Zorab and Brown (1926) were both heard by Rowlatt J on the same day and both concerned Indian civil servants.  Zorab concerned a British subject who was born in Calcutta and who for thirty years lived all his life in India generally in hotels. In 1920 he left India and thereafter lived in hotels in the United Kingdom, Paris and Belgium. Between November 1920 and May 1925 he lived in the United Kingdom for approximately two and a half years (being about six months of each year) for the purpose of seeing friends. He was assessed to income tax for the year 1924-25 but the Special Commissioners held that he was not resident in the United Kingdom for that year. On appeal Rowlatt J held that there was evidence on which the Commissioners could come to their decision and that they had not misdirected themselves in law. At 291 he said:

“Of course it is perfectly right to say that a man has not got to have a residence in the shape of a building to be resident in this country. That is quite clear. But I think that one has to consider not only the time that he is in this country but the nature of his visit and his connection with the country … Because the question to be solved is not whether he is resident for the five months he is here, but whether he is resident for the whole year during the time he is not here. … This gentleman seems to be a mere traveller. … All that can be said about it is that in the course of his habitual travels he spends a considerable period every year in England.”  

35.	 Brown also concerned an Indian civil servant who retired in 1893 and came to the United Kingdom where he took a house and lived until February 1918. He then gave up his house and lived in hotels in the United Kingdom until October 1919. He then spent nine months of each year in hotels in Europe and three months in the United Kingdom visiting his friends. The issue was whether he was resident in the United Kingdom for the year 1924-25 and the Special Commissioners held that he was not. Their decision was upheld by Rowlatt J.

36.	These authorities establish the principle that, in considering whether a person is resident, one has to consider all the facts of the case. The relevant facts include not only the time that a person is in the United Kingdom but the nature of his presence and his connection with this country. A “mere traveller”, who might spend a considerable period in the United Kingdom each year, is not necessarily resident here. 

37.	Applying those principles to the facts of the present appeal it is relevant that, after 1997, the nature of the Appellant’s presence in the United Kingdom 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 had no social life here. He did reside here from 1986 to 1997, during which time he began his present employment which he has retained, but in the relevant years of assessment he only visited the United Kingdom because each of his long haul flights started and ended here. The Appellant’s lack of connections points to the view that, although he might spend time in the United Kingdom each year, he is not necessarily  resident here.

38.	Levene and Lysaght (1928) were heard by the House of Lords consecutively and judgment in both was given on the same day. Levene concerned a British subject who lived in London until 1919 when he left with the intention of living abroad. He returned to the United Kingdom for five months each year but had no fixed residence either in the United Kingdom or abroad. The issue was whether he was resident or ordinarily resident in the United Kingdom for the years 1920-21 to 1924-25 and the Special Commissioners concluded that he was. At 505 Viscount Cave LC said:

“My Lords, the word “reside” is a familiar English word and is defined in the Oxford English Dictionary as meaning “to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place”. … In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure. … But a man may reside in more than one place. Just as a man may have two homes – one in London and the other in the country – so he may have a home abroad and a home in the United Kingdom, and in that case he is held to reside in both places and to be chargeable to tax in this country.”  

39.	Later Viscount Cave went on to consider some examples including that of the wanderer who had no home in any country and at 506 said:

“If , for instance, such a man is a foreigner, who has never resided in this country there may be great difficulty in holding that he is resident here. But if he is a British subject the Commissioners are entitled to take into account all the facts of the case … . Further the case may be different, and in such a case regard must be had to [what is now section 334 of the 1988 Act] which provides that every British subject whose ordinary residence has been in the United Kingdom shall be assessed and charged to tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad.”  

40.	Ms Simler relied upon Levene for the principle that the word “to reside” meant “to dwell permanently or for a considerable time”. Applying that principle to the facts of this appeal 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. During the years of assessment the subject of the appeal the Appellant left Cape Town for business purposes only.  Although he retained a house in the United Kingdom that house was not in the nature of a home but was rather a substitute for hotels.  
    
41.	In Combe (1932) the issue was whether the taxpayer was resident in the United Kingdom in each of the years 1926-27, 1927-28 and 1928-29. Before 24 April 1926 he had been resident and ordinarily resident in the United Kingdom but on that date he left to become employed in New York with a view to his becoming the European representative of the firm.  During each of the relevant three years he visited the United Kingdom on business and stayed at hotels; the time spent in the United Kingdom was 52 days in 1926-27; 175 days in 1927-28; and 181 days in 1928-29. The General Commissioners decided that he was not resident in the United Kingdom. The Court of Session upheld that decision and also held that there was evidence upon which the Commissioners could have come to that finding of fact. Lord Sands at 411 remarked that the visit to the United States was a distinct break and the three years that the taxpayer spent there could be regarded as a whole.  
   
42.	Combe is authority for the principle that, if a person resident in the United Kingdom leaves for another country, and if there is a “distinct break”, then even if he returns here for lengthy visits, he need not be resident here if he has a settled mode of life elsewhere. Applying that principle to the facts of the present appeal 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. Since 1997 he has returned to the United Kingdom but only for the purpose of his employment. 

43.	Ms Simler distinguished Combe on the ground that the Appellant in this appeal spent considerable amounts of time in the United Kingdom.  However, it appears that Captain Combe spent more days each year in the United Kingdom than did the Appellant.  

44.	I conclude that, in the light of the principles established by the authorities, the Appellant was not resident in the United Kingdom. 

Was the Appellant ordinarily resident? 
45.	I now turn to consider whether the Appellant was ordinarily resident in the United Kingdom in the relevant years of assessment and begin by considering the authorities to see what principles they establish. 

46.	In Levene (1928) at 507 Viscount Cave said:

“The expression “ordinary residence” … is contrasted with occasional or  temporary residence; and I think it connotes residence in a place with some degree of continuity and apart from accidental or temporary absence.  So understood, the expression differs little in meaning from the word “residence” … and I find it difficult to imagine a case in which a man while not resident here is yet ordinarily resident here.” 

47.	In Lysaght (1928) the taxpayer was born in England and lived here until 1919 when he retired and went to live permanently in what was then called the Irish Free State. He continued as an advisory director of an English company; he came to England each month for a directors’ meeting when he stayed for about a week usually at a hotel. The issue was whether he was resident and ordinarily resident in the United Kingdom for the years 1922-23 and 1923-24. The Special Commissioners found that he was and the House of Lords held that there was evidence upon which they could properly arrive at that conclusion. At 527 Viscount Sumner said:

“My Lords, the word “ordinarily” may be taken first. The Act on the one hand doe not say “usually” or “most of the time” or “exclusively” or “principally”, nor doe it say on the other hand “occasionally” or “exceptionally” or “now and then” .. . I think that the converse to “ordinarily” is “extraordinarily”, and that part of the regular order of a man’ life, adopted voluntarily and for settled purposes, is not “extraordinarily”. Having regard to the time and duration, the object and the obligation of Mr Lysaght’s visits to England, there was in my opinion evidence to support a finding that he was ordinarily resident, if he was resident in the United Kingdom at all. … Grammatically, the word “resident” indicates a quality of the person charged and is not descriptive of his property, real or personal.”  

48.	Shah (1983) concerned students who entered the United Kingdom to seek educational qualifications and who later applied to local authorities for mandatory awards for further education. It was necessary to decide whether the students had been ordinarily resident in the United Kingdom. The House of Lords applied the principle in Levene and Lysaght and held that the words “ordinarily resident” referred to a person’s abode in a particular place or country which he had adopted voluntarily and for settled purposes as part of the regular order of his life for the time being.   

49.	The authorities establish the principle that ordinary residence means part of the regular order of a man’s life, adopted voluntarily and for settled purposes. Also, if an individual is not resident in the United Kingdom, then it is difficult to find that he is ordinarily resident here. I have concluded that the Appellant was not resident in the United Kingdom and also conclude that he was not ordinarily resident here. 

50.	In Reed v Clark (1985) the taxpayer was normally resident in the United Kingdom but regularly worked in the United States. He was to receive a large payment in dollars in December 1977 and so sought professional advice designed to avoid tax. In 1977 he was regarded as resident in the United Kingdom for the purposes of United States tax. On 3 April 1978 he went to live in the United States and stayed there until 2 May 1979. He then returned to the United Kingdom. The issue was whether he was resident in the United Kingdom in the tax year 1978-79. The Special Commissioners held that he was not and that decision was upheld by the High Court on the ground that the taxpayer had been physically absent for the whole year and that what became section  334(a) of the 1988 Act did not apply because the taxpayer did not leave the United Kingdom for the purpose of occasional residence abroad; his mode of life in the United States was settled and he was ordinarily resident there even though the period of residence was short.  

51.	Ms Simler relied upon Reed v Clark for the principle that it was possible to be ordinarily resident in a year of assessment in which the taxpayer was not resident. However, in that case the taxpayer was held to be ordinarily resident in the place in which he was resident (the United States).  

52.	My conclusion is that the Appellant was not ordinarily resident in the United Kingdom.

Section 334
53.	I now consider and apply sections 334 and 336 of the 1988 Act which contained provisions about the residence of individuals.

54.	The relevant parts of section 334 provided: :

“334.	Commonwealth citizens and others temporarily abroad
Every Commonwealth citizen or citizen of the Republic of Ireland-
(a)	shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad; and

(b)	shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains, whether they arise from property in the United Kingdom or elsewhere, or from any … employment … in the United Kingdom or elsewhere. “
. 
55.	It was accepted that the Appellant was a Commonwealth citizen. The relevance of section 334, therefore, is that as the Appellant’s ordinary residence was in the United Kingdom before September 1997 he remains liable to tax here if his presence abroad after that date was for the purpose of occasional residence abroad. 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. 

56.	I conclude that section 334 does not apply to the Appellant. 

Section 336
57.	At the relevant time the relevant part of section 336 of the 1988 Act provided:

336 Temporary residents in the United Kingdom …
(2)	For the purposes of Cases … III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has. 

(3)	the question whether- …
(b) for the purposes of subsection (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there,
shall be decided without regard to any living accommodation available in the United Kingdom for his use.”

58	Thus section 336 can be contrasted with section 334. Section 334 applies where a person is resident in the United Kingdom and makes occasional visits abroad; section 336 applies where a person who is not resident in the United Kingdom comes here for occasional visits. The relevance of section 336 is that if, after September 1997, the Appellant was in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence here, then he would not be treated as resident here as he did not in the aggregate spend at least six months here; the question as to whether he is here for a temporary purpose is to be decided without regard to any living accommodation he has available here.  

59.	In my view, leaving aside the availability of living accommodation, all the  factors mentioned above point to the conclusion that after September 1997 the Appellant was in the United Kingdom for temporary and occasional purposes only. He was here in order to do his work and for no other reason.  He had no intention of establishing his residence here and his intention was to establish his residence in South Africa. Thus in my view section 336 applies to the Appellant so that he is not to be treated as resident in the United Kingdom.

Conclusion
60.	I conclude that the questions whether the Appellant was resident and ordinarily resident in the United Kingdom in the years in question are matters of fact and degree. Taking into consideration all the evidence before me, and the facts I have found, especially having regard to the Appellant’s past and present habits of life, the reasons for his visits here, the temporary nature of his ties with this country, the more permanent nature of his ties with South Africa, and the distinct break made in 1997, I have come to the conclusion that from 1 September 1997 he ceased to be resident and ordinarily resident in the United Kingdom. After that date this was not where he dwelt permanently nor where he had his settled or usual abode which was in South Africa. Residence here did not have a settled purpose. I also conclude that the Appellant was not ordinarily resident here.         

Decision
61.	My decision on the issue for determination in the appeal is that the Appellant was not resident or ordinarily resident in the United Kingdom in the six years from 1997/98 to 2002/2003 inclusive.

62.	The appeal is, therefore, allowed.

DR A N BRICE

SPECIAL COMMISSIONER

RELEASE DATE: 29 January 2008
This is a corrected version of the original decision

RE-RELEASE DATE: 2 May 2008
SC 3036/2007
24.01.08