The long-running dispute pre-dates HM Revenue & Custom’s new UK residency test, which became applicable from April this year and focussed on whether or not the UK farmhouse they owned remained a family home.
Pauline and Stephen Rumbelow, a property developer, left England in April 2001. After briefly living in an unfurnished flat in Belgium the couple moved to a property in Portugal.
However, HMRC refused to accept that the couple were resident abroad in the tax years 2001-2005 and charged the couple with retrospective tax demands.
The Rumbelows lived at their farmhouse in Northwich, before moving abroad. In the tribunal they argued that they had intended to move permanently abroad when they boarded a Europe-bound train in April 2001.
They said they had only since returned to England as visitors to see friends and family – and never for more than the 90 days a year, the threshold then applied by HMRC for overseas residence.
Although the couple protested that their intention to make their permanent home abroad "could not have been more distinct or clear", Judge Cannan said that Yew Tree Farm had "remained, essentially, a family home".
HMRC drew up a detailed table (viewable here) of the couple’s movements over a five year tax period as well as noting visits made to their UK residence, and concluded that, not only did the couple made frequent trips to the family home, but, that in some tax years, such as 2002-3 their “settled or usual abode” remained in the UK.
The tribunal ruled that although there had been some "loosening" of the couple’s social and family bonds with Northwich, it was not "substantial" enough to make them non-UK residents.
The £600,000 figure is based on disputed income tax and capital gains tax from the years 2001 to 2005 for both Mr and Mrs Rumbelow.
The ruling pre-dates this year’s Residency Test criteria, and in the court documents, HMRC states that it closely followed the residency guidance “as laid out in booklet IR20” – which relates to the case of The Supreme Court in Gaines-Cooper.
The Gaines-Cooper case also serves to highlight the challenges that expatriate Britons can face when attempting to sever their tax obligations to the UK.
After many appeals Robert Gaines-Cooper, a wealthy entrepreneur who moved to the Seychelles in 1976, eventually lost his case in 2011 when the Supreme Court ruled that he was still technically a UK resident.
Although Gaines Cooper was careful never to stay 91 days in the UK in any given year – the then widely-accepted measure of residency – the court ruled that his close connections with Britain after decades showed that he was, in fact, still resident – and thus liable for years of back taxes.
This year the Government attempted to address this grey area, by publishing its first comprehensive legal definition of residency.
