A Taxpayer v Commissioners for His Majesty's Revenue and Customs

Factual and Procedural Background

This appeal arises from a dispute concerning the tax residence status of the Appellant for the UK tax year 2015/16. The Appellant received a substantial dividend during that year but claimed non-residence in the UK, asserting residence in the Republic of Ireland instead. The central issue concerned the application of the statutory residence test under Schedule 45 to the Finance Act 2013 ("FA 2013"), which prescribed that residence would be established if the Appellant spent more than 45 days in the UK during the tax year.

Although the Appellant was present in the UK at the end of 50 days, she contended that six of those days should be disregarded under paragraph 22(4) of Schedule 45, which excludes days spent in the UK due to exceptional circumstances beyond the individual’s control that prevented departure, provided there was an intention to leave as soon as possible. The Appellant argued these six days were spent assisting her twin sister, who suffered from alcoholism, suicidal tendencies, and was neglecting her children.

The Respondents, the Commissioners for His Majesty's Revenue and Customs ("HMRC"), rejected the claim of exceptional circumstances and issued a closure notice including the dividend in taxable income. The First-tier Tribunal ("FTT") allowed the Appellant’s appeal, finding exceptional circumstances existed for the six days. HMRC appealed to the Upper Tribunal ("UT"), which set aside the FTT’s decision and ruled in HMRC’s favor, holding there were no exceptional circumstances. The Appellant now appeals to this Court seeking restoration of the FTT’s decision.

Legal Issues Presented

1. Whether the Appellant was resident in the UK for the 2015/16 tax year under the statutory residence test.
2. Whether the six days spent in the UK could be disregarded under paragraph 22(4) of Schedule 45 due to exceptional circumstances preventing departure.
3. Whether moral or conscientious obligations can constitute exceptional circumstances or prevent a person from leaving the UK.
4. Whether the question of whether circumstances are "exceptional" is a question of fact or law.
5. Whether the FTT’s findings on exceptional circumstances were internally inconsistent or perverse.
6. Whether the statutory conditions of paragraph 22(4) were satisfied on each of the six days individually.

Arguments of the Parties

Appellant's Arguments

• The Appellant argued that the six days in question should be disregarded because she was prevented from leaving the UK due to exceptional circumstances related to her twin sister’s severe alcoholism, mental health issues, and the need to care for her sister’s minor children.
• She contended that moral and conscientious obligations can constitute exceptional circumstances and can prevent a person from leaving the UK.
• The Appellant maintained that the FTT’s findings on exceptional circumstances were factual assessments that should not be overturned unless perverse or unsupported by evidence.
• She submitted that the statutory residence test should be applied on a day-by-day basis and that the FTT properly found the conditions of paragraph 22(4) satisfied for each relevant day.

Respondents' (HMRC) Arguments

• HMRC disputed that the circumstances were exceptional or that the Appellant was prevented from leaving the UK, asserting that moral obligations or obligations of conscience do not satisfy the prevention requirement under paragraph 22(4).
• They argued that "prevent" should be interpreted narrowly to mean physical or legal prevention, excluding moral obligations.
• HMRC contended the FTT erred by failing to apply the statutory test to each day individually and that the findings on exceptional circumstances were internally contradictory and perverse.
• They argued that there was insufficient evidence to support the FTT’s conclusion that the Appellant was prevented from leaving on each of the relevant days.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Edwards v Bairstow [1956] AC 14	Standard for appellate interference with factual findings: only if no reasonable tribunal could have reached the conclusion.	The Court applied this principle to affirm that the FTT’s findings on exceptional circumstances were factual and could only be disturbed if perverse; the UT erred in treating the question as one of law.
Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1	Interpretation of "prevent" as stopping or making an act impossible, distinct from mere hindrance.	The UT relied on this to construe "prevent" narrowly, but the Court disagreed with the UT’s restrictive interpretation.
Cozens v Brutus [1973] AC 854	Distinction between questions of fact and law regarding the meaning of ordinary words in statute.	The Court held that whether circumstances are "exceptional" is a question of fact, not law.
Moyna v Secretary of State for Work and Pensions [2003] UKHL 44	Clarification on the interplay between statutory construction (law) and ordinary meaning (fact).	Supported the view that "exceptional circumstances" is a factual determination informed by statutory context.
R v Kelly (Edward) [2000] QB 198	Meaning of "exceptional circumstances" as out of the ordinary, unusual, or uncommon.	The Court adopted this ordinary meaning to assess the facts found by the FTT.
HMRC v Pendragon plc [2015] UKSC 37	Role of the Upper Tribunal in developing structured guidance and distinguishing law and fact.	The Court noted but did not depart from Edwards v Bairstow principles, emphasizing the UT’s limited scope on factual findings.
Degorce v HMRC [2017] EWCA Civ 1427	Reaffirmation of the UT’s role and appellate limitations on factual findings.	Supported the approach that factual findings by the FTT should not be lightly disturbed.
Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5	Appellate courts should not interfere with trial judge’s findings of fact unless compelled.	Reinforced the high threshold for overturning FTT factual conclusions.

Court's Reasoning and Analysis

The Court undertook a detailed statutory construction and factual analysis of paragraph 22(4) of Schedule 45 to the FA 2013, which excludes days spent in the UK due to exceptional circumstances preventing departure.

First, the Court clarified the meaning of "prevent" as an ordinary English word meaning to stop or make impossible, but rejected the UT’s narrow interpretation limiting prevention to legal or physical barriers. The Court accepted that compelling moral or conscientious obligations can amount to prevention if they effectively compel the individual to stay, distinguishing between being prevented from leaving and choosing to stay.

Second, the Court examined whether moral obligations can form part of "exceptional circumstances." It rejected the UT’s strict separation of moral obligations from exceptional circumstances, holding instead that the overall circumstances, including moral obligations arising from a close relative’s illness, must be considered together to determine if they are exceptional and prevent departure.

Third, the Court addressed whether the question of exceptionality is one of law or fact. Applying established authorities, it held that "exceptional circumstances" is an ordinary English phrase and its application to the facts is a question of fact for the FTT. The UT erred in treating it primarily as a question of law.

Fourth, regarding the alleged inconsistency in the FTT’s findings, the Court found that the FTT’s distinction between the sister’s alcoholism and the additional need to care for her minor children was rational and coherent, not perverse or contradictory.

Finally, the Court considered whether the FTT had sufficient evidence to conclude that the statutory conditions were met on each relevant day. Despite some weaknesses in the Appellant’s evidence, the Court found that the FTT was entitled to conclude that the Appellant was prevented from leaving the UK until the situation was stabilized and that she intended to leave as soon as possible. The UT’s conclusion that there was no evidence was not justified.

Holding and Implications

The Court ALLOWED THE APPEAL and restored the decision of the First-tier Tribunal.

This means that the six disputed days should be disregarded under paragraph 22(4) as days spent in the UK due to exceptional circumstances preventing departure. Consequently, the Appellant was not resident in the UK for the 2015/16 tax year for income tax purposes.

No new legal precedent was established beyond clarifying the interpretation and application of paragraph 22(4) of Schedule 45 to the Finance Act 2013 in the context of moral obligations and exceptional circumstances. The decision reinforces the FTT’s fact-finding role and limits the scope of appellate review by the Upper Tribunal on mixed questions of law and fact.