ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small. Change 123: Occasional residence abroad: omission of limitation to Commonwealth citizens and citizens of the Republic of Ireland: section 829
This change extends the application of section 829 to all individuals who are UK resident and ordinarily UK resident and leave the United Kingdom for the purpose only of occasional residence abroad.
Section 829 is based on section 334 of ICTA, which applies only to Commonwealth citizens and citizens of the Republic of Ireland who are ordinarily UK resident.
The origin of the provisions in section 334 can be traced back to section X of the Statute of 1799 (39 George III c.13):
“And be it further enacted that any subject of His Majesty whose ordinary residence shall have been in Great Britain and who shall have departed from Great Britain and gone into any parts beyond the seas for the purpose only of occasional residence at the time of the execution of this Act, shall be deemed, notwithstanding such temporary absence, a person chargeable in respect of his or her income as a person actually residing in Great Britain and shall be assessed and charged accordingly (in the manner hereinafter directed) upon the whole amount of his or her income whether the same shall arise from property in Great Britain or elsewhere, or from any profession, office, pension, stipend, employment, trade or vocation, in Great Britain or elsewhere”
through section 39 of the Income Tax Act 1842:
“And be it enacted that any subject of Her Majesty whose ordinary residence shall have been in Great Britain, and who shall have departed from Great Britain and gone into any Parts beyond the Seas, for the Purpose only of occasional Residence, at the Time of the Execution of this Act, shall be deemed, notwithstanding such temporary Absence, a Person chargeable to the Duties granted by this Act as a Person actually residing in Great Britain, and shall be assessed and charged accordingly (in manner hereinafter directed) upon the whole Amount of his Profits or Gains, whether the same shall arise from property in Great Britain or elsewhere, or from any allowance, annuity, or stipend, (save as herein is excepted,) or from any profession, employment, trade or vocation, in Great Britain or elsewhere”
to its re-enactment, with no pre-consolidation amendments, in the first income tax consolidation Act, the Income Tax Act 1918, as rule 3 of the general rules applicable to Schedules A to E:
“Every British subject whose ordinary residence has been in the United Kingdom shall be assessed and charged to tax, notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains, whether they arise from property in the United Kingdom or elsewhere, or from any allowance, annuity, or stipend (save as herein is excepted), or from any trade, profession, employment, or vocation in the United Kingdom or elsewhere.”
The reference to British subject has subsequently been amended to reflect the establishment of the Republic of Ireland as an independent Sovereign State and the creation of the Commonwealth. But, otherwise, the language of the provision has not changed in any material respect.
In his judgment in Reed (HM Inspector of Taxes) v Clark, (1985), 58 TC 528 Ch D(20), Nicholls J reviews the history of this provision (then section 49 of ICTA 1970) and the cases in which it is considered. He observes (at page 550 B):
“Despite the long history of the statutory provision now reproduced as s 49, the researches of very experienced Counsel have not revealed any reported decision in which a claim to tax has succeeded only by virtue of that provision. But in several cases the provision has been commented upon…”
Nicholls J refers to the judgments in Levene v CIR (1927), 13 TC 486 HL at all its stages. The judgment of Viscount Cave LC in that case in the House of Lords contains the following passage (at page 505):
“My Lords, the word “reside” is a familiar English word and is defined in the Oxford English Dictionary as meaning “to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place”. No doubt this definition must for present purposes be taken subject to any modification which may result from the terms of the Income Tax Act and Schedules; but, subject to that observation, it may be accepted as an accurate indication of the meaning of the word “reside”. In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure.”
The cases also make clear that residence in this context denotes, to paraphrase the words of Rowlatt J at first instance in Levene (at page 492), a quality attributable to the individual which makes the individual describable as resident with reference to a place.
In Reed v Clark the issue in relation to section 49 of ICTA 1970 was whether, it having been found by the Commissioners that Mr Clark was resident in the USA for the tax year 1978-79, his residence was only occasional. The decision of the Commissioners that it was not and that Mr Clark was both resident and ordinarily resident in the USA for that year was upheld by Nicholls J.
Although historically the provisions in section 334 of ICTA have been limited to British subjects and their current manifestations, Commonwealth citizens and citizens of the Republic of Ireland, the observations of Viscount Cave LC in Levene quoted above are applicable to any individual who has his or her settled or usual abode in the United Kingdom. Such a settled or usual abode will in virtually every case lead to the result that an individual is ordinarily UK resident for income tax purposes.
In accordance with the judgment of Viscount Cave LC, occasional residence abroad by such an individual who is not a Commonwealth citizen or a citizen of the Republic of Ireland equally will not displace the quality of the individual’s residence as being in the United Kingdom. In practice, the same tests are applied in determining whether any individual, whether or not a Commonwealth citizen or a citizen of the republic of Ireland, has ceased to be UK resident upon leaving the United Kingdom. This change makes this explicit.
In rewriting this provision, it has also been made explicit that it only applies if the individual is UK resident, as well as ordinarily UK resident, at the time the individual leaves the United Kingdom. There has never been any doubt that the provision only applies if the individual is both UK resident and ordinarily UK resident at that time.