Home or hotel - residence status

Advising on the tax residency status  of individuals has become an increasingly fraught  task over the past 18 months.  Chief among the problem topics, particularly in relation to those individuals looking to exit the UK and thereby lose their resident and ordinarily resident status, are the necessary steps to be taken in relation to a previous UK home. 

A sale or long term renting out of the property is not always achievable in the current economic climate, or desirable by those who wish to retain a bolthole for use on return trips to the UK.  Whilst the "distinct break" criteria for each individual will fall to be decided on the particular facts, retaining a home in such a fashion did for the taxpayer in HMRC v Grace [2008] EWHC 2708 (Ch) who was held to have retained his UK residency status despite him having set up home in South Africa..  The view expressed by the Special Commissioner, that the UK property was not in the nature of a home but, rather, a substitute for hotels, was dismissed by the High Court.  It remains to be seen what view, if any, will be expressed on the matter by the Court of Appeal, when it hears the appeal on 5 October.

The opinion of the High Court in Grace is, in any event, in stark contrast to the one expressed by that the same court in Cherney v Deripaska [2007] EWHC 965; one of the many forum-shopping hearings between any two interchangeable robber barrons, each possessed of immeasurable wealth but not a smidgeon of class between them.  In Cherney, and in the context of determining whether, for jurisdictional purposes, Deripaska maintained a "home" in London, Mr Justice Langley, having rehearsed the facts concerning the use of the London property by Deripaska, his wife and children (para 39) proceeded (para 45) to hold:

"... The "quality" of the use of the house is, I think, equally important. In many ways its use by Mr Deripaska resembles that of a private hotel. It is infrequent, intermittent, and generally fleeting. The house has the character of continuity and permanence; its use does not. It cannot, I think, in any normal sense of those words, be described as a "settled or usual place of abode" of Mr Deripaska. ..."

Mr Grace, a pilot, uses a nondescript, and otherwise unlived in, semi-detached in the sticks as somewhere convenient to crash for a few days when in the UK having flown long haul, and  that much gives his property the quality of a home.  Yet, Deripaska and his family use a prime London property, replete with permanent security team, household servants and much more besides, in a not dissimilar manner but that does not give the property the quality of a home. Erm, best run that by me again.