HMRC UPS ANTE AGAINST TAX EXILES (22/02/10)

Formula One star Lewis Hamilton, the Barclay brothers, owners of The Telegraph newspaper and retail tycoon Philip Green are among dozens of the country's wealthiest business figures and celebrities who could feel the pressure as part of an HM Revenue & Customs crackdown on Britain's super-rich tax exiles.

The failure of the appeal in the long-running case concerning businessman Robert Gaines-Cooper was the latest of numerous blows for tax exiles, who were once able to retain strong links with Britain without becoming resident.

The Revenue has since tightened the rules, stopped making rulings on individual cases and, last year, issued guidance emphasising the importance of “pattern of lifestyle” in determining UK residency.

Last week, the Court of Appeal upheld the right of HMRC to tax Mr Gaines-Cooper, who has lived in the Seychelles since 1976. The judges said that he had never been exempt from UK taxes as a non-resident citizen.

Although he had abided by the rules to spend fewer than 91 days here, he had still not cut his ties with the UK. Mr Gaines-Cooper may now have to pay a tax bill of £30m, for the years from 1993 to 2004.

The HMRC confirmed they began receiving calls from worried tax exiles demanding to know whether they face huge tax bills just hours after the judgement was made.

If upheld, the effect of the ruling will be to expose thousands of the richest people, who wish to be tax exiles, to unexpected retrospective tax bills, not just ones for future years.

Ken Jones, partner at Burgess Hodgson, said retention of ties to the UK can seriously jeopardise residency status. “Many individuals, including those who have already left and think they are no longer resident here, need to reassess their lifestyles and take professional advice,” he said.

And, according to The Guardian, the Treasury is in talks with the country's top wealth advisers and accountants to introduce a new law on residency. The working party is soon to conclude its study and the law could be introduced next year if Labour retains power at the next election.

An HMRC spokesman said: "We are pleased that the court of appeal has confirmed that HMRC's interpretation of its guidance on residency. It is also useful that the Court of Appeal has acknowledged that HMRC can increase compliance activity in an area so that it can ensure it catches those who may have previously not paid tax that is due."