Healey v Revenue & Customs

Factual and Procedural Background

The Appellant left the UK on 2 April 2006, indicating to the tax authorities that he intended to work full-time abroad and did not intend to live outside the UK permanently. During the tax year 2006/2007, the Appellant did not enter the UK, and the tax authorities accepted his non-UK residence status for that year. However, in the following tax year 2007/2008, the Appellant undertook substantive duties in the UK on 71 days. Consequently, the tax authorities challenged his non-resident status for 2007/2008, contending he was UK resident that year.

The Appellant sought a preliminary hearing to determine whether he had effected a distinct break from the UK upon leaving in April 2006, which, if established, might govern his residence status for 2007/2008. The tax authorities opposed the request, arguing that the preliminary hearing would not simplify the proceedings and that substantial evidence would still be required in any event.

The Tribunal was asked to decide whether to grant the application for a preliminary hearing on this distinct break issue before the substantive appeal concerning residence status was heard.

Legal Issues Presented

1. Whether the Appellant effected a distinct break from the UK upon leaving on 2 April 2006, solely by virtue of being absent from the UK for the entire tax year 2006/2007.
2. Whether the case law, particularly the authority of Reed v. Clark, conclusively establishes that total non-presence in the UK for a full tax year conclusively establishes a distinct break.
3. Whether a preliminary hearing on the distinct break issue should be granted before the substantive hearing on the Appellant's residence status for 2007/2008.

Arguments of the Parties

Appellant's Arguments

• The Appellant contended that the absence from the UK for the entire tax year 2006/2007 established a distinct break, relying on the authority of Reed v. Clark.
• He suggested that if the Tribunal decided in his favour on the distinct break, the tax authorities would likely accept that he was non-resident for 2007/2008, potentially obviating the need for a full hearing.
• The Appellant resisted answering numerous detailed questions from the tax authorities, arguing that if the absence for a full year was conclusive, such inquiries were unnecessary.

Respondents' Arguments

• The tax authorities opposed the preliminary hearing, arguing it would not be simple and would require duplicative evidence that would be necessary in the substantive hearing anyway.
• They contended that the distinct break issue could not be conclusively established solely by absence for a full tax year, emphasizing the need for a multi-factorial enquiry including family and social ties.
• The authorities noted that the test for residence in 2007/2008 would not be determined solely by the distinct break issue and that the Appellant’s presence in the UK for more than 140 days could be relevant.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal Judge analyzed whether the Appellant’s absence from the UK for the entire tax year 2006/2007, without more, could establish a distinct break from the UK. The Judge emphasized that the authority of Reed v. Clark depended on the individual facts of that case, including the absence of family ties and a settled base abroad. The Tribunal found that the present case involved insufficient evidence to conclude that the Appellant had effected a distinct break solely through absence, especially given the apparent family connections remaining in the UK and the Appellant’s pattern of travel.

The Tribunal also noted the evolution of case law emphasizing a multi-factorial enquiry into residence status, considering family, social ties, and intentions to settle abroad, which the Appellant had not yet addressed. The Judge concluded that granting a preliminary hearing would be futile because if absence alone was not conclusive, detailed evidence would be required, negating the purpose of a preliminary hearing.

Furthermore, the Tribunal accepted the Respondents’ submission that even if a distinct break were established, the residence status for the subsequent year would still require a broader assessment, including the number of days physically present in the UK and other factors as per HMRC’s IR20 guidance.

Finally, the Tribunal observed that the substantive hearing remained the appropriate forum for assessing these issues comprehensively, and that questions of judicial review related to breach of legitimate expectations were beyond the Tribunal’s remit.

Holding and Implications

The Tribunal DISMISSED the Appellant's application for a preliminary hearing to determine the distinct break issue prior to the substantive appeal.

The direct effect of this decision is that the substantive appeal concerning the Appellant’s residence status for the tax year 2007/2008 will proceed without a separate preliminary determination on the distinct break issue. The Tribunal found no sensible prospect that absence alone conclusively establishes a distinct break, and thus a preliminary hearing on this point would be futile. No new legal precedent was established by this decision.