On 12 August 2005 Rupert Kimber disposed of shares resulting in a potential capital gains tax (CGT) liability of £99,500.
The basic principle is that an individual is only liable to CGT if he or she is resident or ordinarily resident when the disposal is made. An individual is normally resident for a complete tax year. By concession, years can be split into resident and non-resident portions when the individual concerned permanently arrives into or leaves the UK during the year.
Was Kimber resident on 12 August 2005?
HM Revenue & Customs held that he was. Kimber’s appeal against that decision was heard by the Tax Tribunal.
Kimber had worked for a company in Japan. It was agreed that he had been non-UK resident between 1989 and 1994 and again from 17 September 1997 until at least 17 July 2005. He had been resident in the UK in the intervening period.
In early 2005 he decided to move jobs. He considered working in Hong Kong but in April 2005 was offered a London-based post with Polar Capital.
He returned to the UK on 17 July and stayed with his mother-in-law in Kent.
While still in Japan, he booked a four week family holiday to Italy, which he went on between 30 July and 28 August 2005.
He commenced work at Polar Capital on 1 September 2005.
In 2002 Kimber had acquired a 99 year lease on a National Trust property – The Old Hall, Aylsham, Norwich. Much needed renovation work started in 2004 but the house wasn’t ready for occupation until 2006. Until The Old Hall was habitable the family rented Squirrelwood Farm, High Keeling, Norfolk. The “printing date” on the draft lease was 27 July 2005. The Tribunal concluded that a decision to take the lease must have been made before 27 July, because were that not so, the eventual lease signed in unchanged form would certainly not have been printed out on 27 July.
While the family was resident in Japan the couple’s elder two girls had been enrolled in Greshams School in Norfolk
The HMRC guidance on “Residence” states:
“It is possible that after you first come to the UK your circumstances change and you are going to live here permanently or indefinitely, or you are going to remain here for three years or more from the date of your arrival. In such a situation, you will become resident and ordinarily resident in the UK…”
Kimber accepted that the guidance was correct but argued that, until he returned from Italy, he should be regarded as being in the UK for a temporary purpose and not with a view to permanent residence.
The Tribunal decided that on the facts presented to them, at some time before 30 July, Kimber formed the intention to stay in the UK permanently and then became resident. Alternatively, when he arrived on 17 July he was not coming to the UK for a temporary purpose but knew that, a pre-booked holiday in Italy apart, he and his family were returning to the UK, and very specifically to Norfolk.
He was resident on 12 August and thus liable to CGT in respect of the disposal of the shares.
Gerry Brown is technical manager at Prudential
