HMRC gets tough as entrepreneur hit with £30m tax bill

The case of Robert Gaines-Cooper could spell trouble for non-domiciled business people...

Last Updated: 31 Aug 2010

There’s no question that the Revenue is on the offensive at the moment. Its latest victim is Robert Gaines-Cooper, an entrepreneur who’s supposedly been domiciled in the Seychelles for tax purposes since 1976: yesterday a court upheld HMRC’s claim that although he’s assiduously followed the rules on residency, England had remained ‘the centre of gravity of his life and interests’ – and as such, he should be liable for back taxes for the entire period (which could total some £30m). A sensible crack-down on tax-dodgers? Or a case of the taxman moving the goalposts unfairly?

Gaines-Cooper (who made his money from jukeboxes and laryngeal masks, amongst other things) apparently moved to the Seychelles in 1976. According to his website, he ‘married a Seychelloise lady and spends all his available free time at his home... He intends to stay there and die there... His will even states that his ashes are to be scattered on the island.’ And in line with the non-dom rules, he has spent less than 90 days in the UK every year since.

However, HMRC argued that he never really severed ties with the UK: he’s kept a house in Henley-on-Thames (where, according to the Times, ‘he keeps his collection of paintings, classic cars and guns’ - and perhaps more significantly, his wife and son), sent his kid to school in the UK, and even drew up that will under English law. Unfortunately for Gaines-Cooper, the Court of Appeal agreed: although the judges said they had ‘some sympathy’ for him, they ruled that he hadn’t made a ‘distinct break’ from England. So now he faces a whopping tax bill.

This test case is all part of a new HMRC crack-down on high-net worth individuals using the non-residency rules to avoid paying income tax in the UK – which will mean more scrutiny of those who base themselves in tax havens like Monaco but spend a lot of time in the UK (like Sir Philip Green - we hate to think what his back taxes might be). Unlike the rather lax system we’ve had previously, the Revenue will now apparently look at every aspect of a tax exile’s lifestyle – from club memberships to phone bills – to judge whether they’re actually non-resident, rather than just the number of days they sleep here.

We suspect most people won’t have a problem with this; it seems entirely unfair that rich people get to avoid paying tax just because they have a clever accountant. On the other hand, it also seems a bit unfair to punish people if they’ve followed the rules (it’s not Gaines-Cooper’s fault that the system was flawed). And we suppose you might also argue that this harder line will put these high-rollers off from coming to London to spend their pots of cash.

Either way, the priority has to be to have a tax set-up that’s clear and unambiguous – so if people break the law, they can have no complaints. We’re not sure that’s the case here.

In today's bulletin:

Latest unemployment drop a mixed blessing
Corolla steering fault deepens Toyota woes
Thorntons enjoys sweeter profits after stingier Christmas
HMRC gets tough as entrepreneur hit with £30m tax bill
Route to the Top: Nine ways to build new-team trust

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