Davies & Anor, R (on the application of) v Revenue and Customs

Factual and Procedural Background

Three individual taxpayers (together, “the Appellants”) sought judicial review of determinations made by the United Kingdom tax authority (“the Defendant”) that they were resident and ordinarily resident in the UK for a series of tax years.

• The first two Appellants are property developers who, in March 2001, moved from The City in the UK to apartments in The City abroad, became directors of Company B and claimed to work there full-time. In December 2001 Company A bought their shares for substantial consideration, prompting a capital gains liability unless they were non-resident in 2001-02.
• The third Appellant is an entrepreneur who has lived internationally since the 1970s, maintaining homes in the UK and the Seychelles. Earlier tribunal proceedings had already found him resident and ordinarily resident in the UK under ordinary law for 1992-93 to 2003-04, but he argued that published tax guidance should override that outcome.

All Appellants relied on a Revenue booklet (known as “IR20” and in force 1999-2009) which, they said, contained a more generous test for becoming non-resident than the ordinary common-law test. Permission for judicial review was initially refused but later granted; the Court of Appeal dismissed the substantive claims, and the present appeals reached the Supreme Court.

Legal Issues Presented

1. Whether, on its proper construction, IR20 promised that a taxpayer would be treated as non-resident by meeting specified day-count and intention requirements without having to show a “distinct break” with UK family and social ties.
2. Whether, even if IR20 did not carry that meaning, the Defendant’s settled practice had been to apply such a benevolent interpretation, giving rise to a legitimate expectation enforceable in public law.

Arguments of the Parties

Appellants’ Arguments

• IR20, particularly paragraphs 2.7-2.9, stated in clear, unqualified terms that a taxpayer who (a) left the UK permanently, for at least three years, or for a settled purpose covering a whole tax year and (b) kept UK visits below 183 days in any year and below a 91-day average, would be treated as not resident and not ordinarily resident.
• Alternatively, the Defendant’s longstanding practice was to decide residence solely by the IR20 day-count, so the later insistence on a “distinct break” was an unlawful change of approach.
• Those published criteria or practices created a legitimate expectation binding on the Defendant irrespective of the ordinary law.

Defendant’s Arguments

• IR20 must be read as a whole: its preface and context show that the guidance was only “general” and always subject to evaluation of all the facts, including whether the taxpayer had effected a distinct break in his UK life.
• The booklet reflected, rather than replaced, the ordinary common-law test and statutory provisions; no promise of a purely mechanical day-count test was ever made.
• No consistent contrary practice existed; any perception to the contrary was anecdotal and unsupported by objective evidence.

Table of Precedents Cited

Court's Reasoning and Analysis

A majority of the Supreme Court (Judge Wilson, Judge Hope, Judge Walker and Judge Clarke; Judge Mance dissenting) held that IR20, read as a whole, did not promise a purely mechanical day-count route to non-residence:

• The preface and paragraph 1.1 twice caution that the booklet gives only “general guidance” and that application to each taxpayer depends on all the facts.
• Words such as “usually live”, “visits”, and references to maintaining property in the UK indicated that qualitative factors—specifically a distinct break in the pattern of UK life—remained critical.
• The day-count limits (183-day ceiling and 91-day average) functioned as necessary but not sufficient conditions; they did not displace the break-in-ties requirement established in the authorities.
• Any contrary reading would render large portions of the booklet (and the underlying law) redundant and depart from the Defendant’s statutory duty to tax residents.
• On the alleged “settled practice”, the evidence was “far too thin and equivocal”: one unpublished inspector’s letter plus anecdotal statements could not show a widespread, unambiguous practice amounting to a promise.

Judge Mance dissented, finding that IR20 aimed to simplify complex case law and that its plain wording delineated specific categories (e.g., absence for three years with limited visits) that automatically conferred non-resident status without further inquiry into personal ties.

Holding and Implications

APPEALS DISMISSED.

The Court concluded that IR20 did not override the ordinary legal requirement for a distinct break from UK residence and that no enforceable Revenue practice to the contrary existed. Consequently, the Defendant may assess the Appellants as resident and ordinarily resident under ordinary law.

Implications are chiefly practical: taxpayers cannot rely on IR20’s day-count provisions alone; they must demonstrate a substantive rupture with UK life. The decision also underscores the high threshold for establishing legitimate expectation based on published guidance or alleged administrative practice. No new precedent was set; the Court reaffirmed existing principles on residence and on legitimate expectation in public law.