[2009] UKFTT 384 (TC)

TC00319
Appeal number: SC/3053/2007

RESIDENCE – capital gains tax – whether taxpayer working full-time abroad – no – whether dual resident – no – whether discovery assessment valid – yes – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	DEREK WILLIAM HANKINSON	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Capital Gains Tax)	Respondents

			TRIBUNAL: 	JOHN F AVERY JONES CBE
JOHN CLARK (JUDGES OF THE FIRST-TIER TRIBUNAL)

Sitting in public in London on 19 to 23 and 26 to 30 October 2009

Robin Mathew QC and Emily Gillett, counsel, instructed by Cowgill Holloway, for the Appellant

Ingrid Simler QC and Akash Nawbatt, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	These are appeals by Mr Derek William Hankinson against (1) a discovery assessment made on 24 January 2005 to income tax and capital gains tax for the year 1998-99 and (2) a statutory determination of ordinary residence dated 30 November 2006 (the reason for both is that the appeal against the assessment raised a dispute about the Appellant’s ordinary residence, which has to be determined by the Board, which may also be appealed).  A further appeal against a penalty assessment has been consolidated with these appeals and will be heard separately.  The Appellant was represented by Mr Robin Mathew QC and Miss Emily Gillett, and the Respondents (“HMRC”) by Miss Ingrid Simler QC and Mr Akash Nawbatt.
2.	The issues in these appeals are:
(1)	Whether the Appellant was resident or ordinarily resident in the UK in 1998-99;
(2)	If he was, whether under the double taxation agreement (“the Treaty”) with the Netherlands, he was resident for the purposes of the Treaty in the Netherlands;
(3)	If he was resident for that purpose in the UK, whether the discovery assessment is valid;
(4)	Making findings of fact requested by the High Court for the purposes of judicial review proceedings as explained in paragraph 114 below.
3.	As we have said, these appeals relate to 1998-99.  The delay is not the fault of the parties because it relates to a discovery assessment made on 24 January 2005.  But the fact that we are dealing with events of over ten years ago has made our task difficult.  This has been aggravated by the fact that the UK group of companies of which the Appellant was chairman has since been sold for nominal consideration and no documents are available, the Dutch company for which the Appellant worked during the year in question was sold after the events with which we are concerned and no documents are available from that company either, and his solicitors apparently destroyed routine correspondence after five years.  Virtually the only contemporary documents are company minutes and the Appellant’s own records of expenditure such as on credit cards.  Since these have not been charged to either company there is a presumption that they represent personal expenditure.
Facts
4.	Briefly, the Appellant’s non-resident trusts sold their holdings in Bison Limited (“Bison”) to Phildrew Ventures Fourth Fund (“Phildrew”), a venture capital institution, on 24 September 1997 but the trusts retained an interest in Bison.  He entered into a service agreement with Monoliet Holding BV (“Monoliet”), a Dutch subsidiary that Bison has acquired in 1990, to work in the Netherlands from 23 February 1998 for a period of a minimum of 15 months, while remaining as non-executive chairman of Bison.  On 2 January 1999 he became ill on a flight to Barbados where he had booked a holiday from 2 to 30 January 1999.  He returned to the UK on 30 April 1999 but did not return to work in the Netherlands again, and retired from the service of Monoliet on about 15 August 1999 and from his non-executive chairmanship of Bison on 31 August 1999.  Substantial gains realised in the non-resident trusts on the sale to Phildrew were crystallised in March 1999.  These will be taxable on the Appellant if he were ordinarily resident in 1998-99, which is the main issue in these appeals.
5.	We had 25 ring binders of documents and heard evidence from the following witnesses:
(1)	The Appellant;
(2)	Mr Sybrank Schrale, the director of Monoliet;
(3)	Mrs Annette Pairman, retired Scottish solicitor who advised Bison and the Appellant and his trusts;
(4)	Mr Frank Neale, partner in a firm of private equity advisers then called Phildrew Ventures;
(5)	Mr Graham Hart, Director of Taxation, Cowgill Holloway LLP, chartered accountants, currently advising the Appellant;
(6)	Mr Gordon Wright, Group Finance Director of Bison (by video link).  We should mention that this was an internet-based video link for which we had to sit in the waiting room in order to receive an adequate signal (we were otherwise sitting in the basement of the building).  This proved to be completely inadequate with long time delays and frequent interruptions to the signal, and in the end we used a telephone with loud speaker which meant that we had to move into another room.  The Tribunal has telephone line based video conferencing facilities and we would ask that in future only this system should be used. 
(7)	Mrs Lesley Turnbull, Assistant Investigator, HMRC Special Investigations Team who prepared the charts showing the Appellant’s movements.
In addition we had witness statements from the Appellant’s wife Mrs Evelyn Hankinson, who unfortunately died before the proceedings, Mr Willem Markerink, at the relevant time director of Turnpoint BV in Rotterdam, corporate finance advisers (who was not available to give evidence), and Mr Ron Hobbs, at the relevant time a partner in Phildrew Ventures (whom in the end Miss Simler decided not to call).  We give these such weight as is appropriate in the circumstances.   
6.	The main issue in these appeals relates to what the Appellant was doing in the Netherlands.  His account was briefly that he was looking to expand the European business through acquisitions and building a factory.  Miss Simler contends that he spent insufficient time working in the Netherlands to become not ordinarily resident and the evidence does not support the Appellant’s statements of what he was doing there.  In addition she attacks the Appellant’s (and Mrs Pairman’s) credibility in relation to other matters.  Since we are dealing with events in 1998-99 for which people’s recollections may not be reliable we shall summarise the documentary evidence and then add in brackets (to show that it is not part of the quoted document) what the witnesses said followed by whether or not we accept the statement.  For the avoidance of doubt when we state that a witness said something (or something was contained in a witness statement) this is to be taken as our recording what was said or written and not that we accept the statement as a fact.
7.	We find the following facts:
Generally
(1)	 The Appellant is an extremely successful self-made businessman.  He worked his way up from being an electrician in charge of electrical machinery in 1966 to managing director of Bison in 1982.  Bison’s business was manufacturing pre-stressed concrete flooring.  He arranged a management buy-out in 1985 and transferred his shares to non-resident family trusts in 1987.  Bison was sold to NSM in 1988 and he remained as a director.  In 1992 when NSM were in financial difficulties he re-acquired Bison through family trusts with backing from the Bank of Scotland and became chairman and chief executive.  As already mentioned the trusts sold their interest to Phildrew in September 1997 while retaining a smaller investment.  He gained the impression that the Appellant liked to make the big strategic decisions.  Mrs Pairman told us (and we accept) that the Appellant “doesn't like to become involved in detail; he likes to ask a question, have someone go away and research it and get advice on, it and then tell him a fairly simple straightforward answer.”      
The business requirements outside the UK 
(2)	A Final Investment Recommendation (“FIR”) was prepared by Mr Frank Neale and Mr Ron Hobbs of Phildrew leading to the investment by Phildrew in the Bison group in September 1997, the source of which must be the Appellant and others at Bison.  The FIR contains the following:
“4.2.1  The Dutch market has shown steady growth over the past few years and this is expected to continue over the period of our investment.  We are less concerned about the prospects for growth in Holland as Monoliet is already operating at full capacity and its sales forecasts reflect this.
4.2.6  The hollowcore market in which Monoliet is not a player is dominated by a Bison look alike known as VBI who have a 60% share out of 4 factories. 
4.2.7  Monoliet is extremely keen to enter the concrete staircase market in Holland.  Monoliet will be able to ‘import’ the proven Bison UK staircase technology.  This project will require investment and is not in the plan but as it has a three year payback should easily be financeable.
5.3.1  The overall assumption in the 3 year plan is that volumes and contribution will slowly increase as the general market in the UK improves.  No upturn is forecast for Monoliet in Holland.  The current order intake and the market report that we commissioned both support this general view.
5.3.2  [Following figures giving assumptions for growth]  In essence, the plan reflects nothing more than the continuation of the modest growth achieved coming out of the recession.  It clearly does not reflect either a booming economy or a period of economic decline.
6.1.2  [The Appellant’s] principal focus in Holland will be to acquire a ‘stair-case’ business to use as a spring-board to attack the German market, alongside Monoliet’s flooring (ground and 1st) product. 
6.7.4  More likely to occur is growth in Holland by acquisition or the development of a staircase plant.  This will be Derek Hankinson’s prime task once he is resident in Holland.  At this stage it is difficult to assess the likely funding requirement.  Our best guess would be an acquisition total funding of £10m.
8.1 Opportunities
…
Staircases in Holland
Expansion into Germany…” 
(3)	We accept that this document was never seen by the Appellant or the Bison directors.  Mr Neale of Phildrew said (and we accept) that such reports show a “base-case scenario” which they hoped would in practice be better.  At the time it was prepared the Appellant had full knowledge of the business whereas Phildrew started by knowing nothing and their interest was primarily on the financial side, and so the FIR may contain misunderstandings.  An example that we accept is wrong is the £10m estimate in paragraph 6.7.4 for the staircase plant.  The Appellant said £0.5m was the likely figure for building such a plant, and Mr Wright £2m (saying that one could acquire five staircase factories for £10m), and in evidence Mr Neale accepted that the £10m was not just for the staircase plant (all of which we accept).  Accordingly the £10m must relate to a larger project of acquisitions that must have been discussed but not identified and therefore not recorded in the FIR, which the Appellant said (and we accept) was for a pre-stressed flooring factory.  The FIR records that Monoliet manufactured only pre-cast and not pre-stressed products and the Appellant told us that he needed to acquire a pre-stressed business so as to be able to move into the commercial market in addition to the housing market before acquiring the staircase plant.  However, given the emphasis on the staircase plant in the FIR we consider that it is more likely that this was, as Mr Neale said, a quick option rather than something coming after other acquisitions.  Our view that the FIR does not contain the whole picture about proposed acquisitions by Monoliet, is supported by Monoliet’s quarterly report for the Bison board meeting 1 October 1998 which shows their later understanding of what was agreed at the time: 
“A strategy is being worked on that was presented at the start of Novello [forecasts made on the Phildrew acquisition]: take-overs of floor factories, and cooperations that could lead to take-overs.  Because of this Monoliet will become an allround floor supplier.”
(4)	The Appellant’s witness statement, which he maintained in his oral evidence, said: 
“23.  …Because of the existing market share in the UK, it was clear that Phildrew saw the potential European expansion as the way to increase the value of the group as a whole.
28.  The strategy to develop the European side of the business was to acquire a number of pre-stressed flooring companies with ageing production processes which would be determined by my researching the industry, and then combine them all within one ‘super factory.’”
(5)	The emphasis of the FIR was that Monoliet already intended to expand into the staircase market using Bison technology and presumably therefore involving the acquisition of a new factory as the Monoliet factory was working to capacity.  The staircase business would be a “spring-board to attack the German market.”  We have found that the £10m figure represented proposed acquisitions in addition to a staircase business, but we have already found that the staircase project was to come first.  In other words, while there were prospects for European expansion, this was the icing on the cake as the basis of their figures was that “No upturn is forecast for Monoliet in Holland.” Phildrew’s prime focus, as Mr Neale confirmed in his evidence, was a “continuation of the modest growth achieved coming out of the recession” which related to the UK.  Since the FIR is a document prepared by Phildrew we accept it as representing their view rather than the Appellant’s statement that they “saw the potential European expansion as the way to increase the value of the group as a whole.”  For reasons given below, the super-factory was something for the UK group rather than part of the European expansion.  Here, as elsewhere, we consider that the Appellant has started from a proposition that is undoubtedly true (that there were prospects for acquisitions in Europe) but he has totally changed the emphasis of it.
The Appellant’s reasons for working in the Netherlands
(6)	The FIR contains the following:
“1.1  Brian [Buckley, who introduced the business to them] explained that Derek [the Appellant] was not in the best of health and at the age of 57 was considering selling the business so as to sort out his financial affairs.  [We did not see anything to suggest that the Appellant was not in normal health and the Appellant showed us a medical check-up in July 1997 which seems to be normal apart from being overweight (18 stone 4 pounds); accordingly we do not find that his health was a reason for wanting to sell.]
6.1.2  …He [the Appellant] intends to relocate out of the UK for a complete tax year and join Monoliet, in Holland, to crystallise his Trust.  His principal focus in Holland will be to acquire a ‘stair-case’ business to use as a spring-board to attack the German market, alongside Monoliet’s flooring (ground and 1st) product.  Derek will remain Chairman of the group despite being located in Holland as he is seen as the leading figure in the UK concrete products construction industry.
6.2.6  It should be noted that Hankinson is highly committed to achieve a flotation or trade sale within the next three years.”
(7)	On 12 June 1997 Mrs Pairman faxed some questions to Deloitte & Touche in advance of a meeting to be held on 20 June 1997, including the following:
“1.  We have discussed in the past the possibility of Derek moving offshore and then the Trust being disbanded.  We would like to discuss fully the mechanism by which this may be achieved and the tax consequences.
2.  Does Mrs Hankinson have to move offshore at the same time in order to achieve the objective?
3.  Would Holland be an appropriate place for Derek to live?  As part of the arrangement for the sale of Bison he can be appointed as the Managing Director/Chief Executive of Bison’s plant in Holland.  Could we please be advised on the suitability of Holland and in particular [specific taxes are then mentioned]
4. Assuming that it is only Mr Hankinson who is required to live offshore:
…
(b) would holding a non executive position in the United Kingdom be acceptable?
(c) how much involvement in the Dutch business is required i.e. does it require to be full-time or would part-time be sufficient?...”
(8)	Deloitte & Touche advised at the meeting as recorded in a note:
“2.  We then talked about the general issues of Derek moving offshore.  I went through the normal test of Derek having to spend a full tax year abroad with a less than 91 day average test over the whole period.
I explained that if the full time employment could be established then it would not be necessary for Mrs Hankinson to move offshore at the same time.
We discussed the position in Holland where Derek is likely to be employed by the Dutch subsidiary.…
I confirmed that Derek could retain a non-executive position in the UK (it is anticipated he might spend 1-2 days a month in connection with these UK duties).”  [A note of a subsequent meeting on 23 October 1997 changes this to four meetings a year for which he was not remunerated.  The same meeting records that “He [the Appellant] satisfied us that the employment would be a full time job…..”]
(9)	The Appellant’s witness statement, which he maintained in his oral evidence,  said:
“20.  As talks progressed, it became clear that I would have to manage and oversee any European project, probably in Holland.  That was part of the deal, although not emphasised in the legal documents (because the subsequent business strategy was largely irrelevant to the buy-out terms and would be for the board of the new holding company) it was in business terms the lynch pin of the buy-out project.  It was the essential reason for the deal so far as Phildrew were concerned.  I am quite clear about that.
25.  It was recognised by everyone involved in the September 1997 deal that in order to achieve the planned growth expansion and greatly increase the market share in Europe, I would need to commit myself to a fairly long stay in Holland.  I was prepared to do that and in any event it was a pre-requisite by Phildrew in order to feel comfortable that the purchase price was justified and their investment was worthwhile.
27.  …In my opinion, there would not have been any sale had I not agreed to go to Holland, which was the most likely place, or wherever in Europe was appropriate….”
(10)	The emphasis of the FIR was that the Appellant wanted to go to the Netherlands for a complete tax year for tax reasons, which Phildrew would go along with so long as he remained chairman of the group, since there was business that he could do in the Netherlands and Mr Neale said (and we accept) that they thought that Mr Schrale needed more guidance.  The questions put to Deloitte & Touche and their advice are meaningful only if one starts with a tax reason for the Appellant wanting to become non-resident (which had been discussed in the past, see No.1 of the 12 June 1997 questions), and then seeing if the business requirements can be fitted round the tax requirements (see particularly questions 4(b) and (c)).  The Appellant’s emphasis, which he maintained throughout his evidence, was that there was a business requirement for him to be in the Netherlands and it was a happy coincidence that the tax benefits could fit in with this.  Again we prefer the FIR and the questions to Deloitte & Touche as contemporary records of what the Appellant said to Phildrew and what he was asking Deloitte & Touche.  As we have found above, we consider that the Appellant has started with a proposition that is undoubtedly true (that there was the possibility of his being employed in the Netherlands) but he has totally changed the emphasis of it.  We do not accept that there would have been no deal with Phildrew if the Appellant had not agreed to go to the Netherlands, or that this was a prerequisite of the deal for Phildrew “in order to feel comfortable that the purchase price was justified and their investment was worthwhile”; that is in conflict with the FIR, which we prefer as it is Phildrew’s contemporary document, saying that “no upturn is forecast for Monoliet,” and their figures were on the basis of “the continuation of the modest growth achieved coming out of the recession” for the UK, although we accept that this was the “base-case scenario.”  We find that the prime reason for his proposed non-residence was to save tax with the business requirements being fitted round it in a way that Phildrew were prepared to accept, rather than that it was Phildrew and the business requirements that were the driving factors.  There is, of course, nothing against having primarily a tax reason for wanting to become non-resident (or having both tax and business reasons); the question remains whether he has [did?] in fact become non-resident (see paragraph 46 below).  But the fact that the Appellant continued to maintain that tax was merely a consequence of the business requirements casts doubt on the credibility of his other evidence.
The Appellant’s employment with Monoliet
(11)	The Appellant entered into a contract of employment with Monoliet on “25 day of februari” [“day of” being pre-typed, and the year is unstated but must be 1998].  There is no evidence to support Mrs Pairman’s statement that it was in almost final form by completion of the Phildrew deal in September 1997, and for reasons stated below (see paragraph 7(38) below) we found other evidence of hers unreliable and do not accept it.  It was not included in the completion documents.  Mrs Pairman’s fax to Deloitte & Touche of 9 February 1998 refers to amendments she made after a meeting with Steve [Midwinter, of Deloitte & Touche] and asks if the draft is in order from the tax point of view.  It is more likely that it was negotiated around the time of these exchanges, which are shortly before it was signed.  Deloitte & Touche replied on 13 February 1998 saying that it was in order, after adding a clause setting out the place of work.  On the same day there was an internal Deloitte & Touche memorandum thanking a colleague for advice on the contract and asking if there were further points on the draft from the employment law point of view.  The colleague’s reply on 18 February 1998 gave two pages of comments none of which were included in the final version.  (Mrs Pairman was unable to explain a letter from Deloitte & Touche saying that their charges were higher than usual because they were very much involved in agreeing the terms of the employment contract, when she said that they had only added the clause setting out the place of work, and it seems that she did not know about the employment law advice, rather than that she was not telling the truth about the involvement of Deloitte & Touche.)  All these exchanges suggest that the agreement cannot have been in near final form in September 1997 and we find that it was being negotiated up to the last minute before signing.  The contract contains the following provisions:
“1.1  The Company [Monoliet] hereby appoints the Executive [the Appellant] and the Executive hereby accepts the appointment and agrees to serve the Company as Chairman and Managing Director with effect from 23 February 1998.  This Contract of Employment will terminate at the end of the month in which the Executive attains the age of 65 [which would be in 2005] unless terminated by either party by three calendar months’ written notice PROVIDED THAT neither party shall be entitled to give notice to the other during the first 12 month period following the commencement date of this Contract.
2.2  The Executive shall perform his duties under this Contract at the registered address of the Company or such other place of business in the Netherlands as the Company and the Group Companies may from time to time require.  The Executive may be required to travel outside the Netherlands but only for occasional visits in the ordinary course of his duties.
3.1  The Executive shall be paid for his services hereunder at a salary at the rate of two hundred and ninety seven thousand Dutch Guilders (Dfl 297,000) per annum gross [using the Revenue’s published spot rate for 31 March 1998 of Dfl 3.491=£1, this is equivalent to £85,076] or at such other higher rate as may from time to time be agreed in writing with the Board or General Meeting of Shareholders of the Company payable monthly in arrears.
4.1  To assist the Executive in performing his duties hereunder the Company shall provide him with a motor car having a maximum catalogue value of Dfl 90,000 [equivalent to £25,780] or such other sum as may be agreed by the Company including Dutch Value Added Taxes (“BTW”).  The expenses of taxing, insuring (including passenger liability), repairing and maintaining and the expense of running the car shall be borne by the Company except for the running costs (petrol and oil) for lengthy private journeys which shall be borne by the Executive.
5.  The Executive shall be entitled to receive his salary and other existing entitlements hereunder in full during a period of absence from the Company through illness of up to but not exceeding 12 months.
7.  In addition to the usual Dutch public holidays and normal days of closure of the Company the Executive shall be entitled in each calendar year to 26 working days’ holiday at full salary to be taken at such reasonable time or times as may be agreed with the Board.”  
It will be seen that clause 1.1 does not provide for full-time work.  Mr Neale said (and we accept) that Phildrew were not concerned within limits with whether the employment was full-time; they were interested in the results.  There is also no reference in the contract to Monoliet providing the Appellant with accommodation. We are not clear about the meaning of “normal days of closure” in clause 7 in the light of the Monoliet report for the Bison Board meeting on 7 November 1998 that there were only 9 productive weeks in the third quarter as the company was closed for four weeks for the summer holiday (and that Mr Schrale was negotiating for a three week closure in 1999), although Mr Schrale told us that the factory closed for only two weeks in the summer (but this may have meant that production stopped for four weeks but two weeks were for maintenance and only closed for two weeks).  A possible, but extreme, reading, which we consider was very unlikely to have been intended by Phildrew and is not therefore a probable one, is that the Appellant was entitled to 46 working days holiday.
(12)	On 1 January 1998 Monoliet entered into a lease, of which we saw a translation, of a furnished apartment in Dordrecht, about 20 minutes by car from Monoliet’s factory in Breda.  The lease took effect from 15 February 1998, was for a period until 14 August 1999 but Monoliet could extend it by giving three months notice before termination (ie by 15 May 1999).  The rent was Dfl 6,250 (equivalent to £1,873 converted at the Revenue’s published spot rate on 31 December 1997, the day before the lease was entered into) per month indexed for inflation, which included water, gas and electricity up to Dfl 400 per month, and it included cable television, cleaning and pollution charges, property taxes, radio and TV licence fees, buildings and contents insurance, maintenance of external parts, four hours household help per week, and car parking.  The telephone connection fee was the liability of Monoliet.  The Appellant described it as fully furnished and all he brought was his clothes (and at some time his golf clubs).
Statistics of the Appellant’s work in the Netherlands
(13)	HMRC have compiled a detailed breakdown of the Appellant’s life from evidence such as credit card and travel information and from answers during cross-examination.  Our findings of fact are based on the principle that, although the burden of proof is on the Appellant, we cannot expect him to remember what he was doing in 1998 and so if there is no information about the time of arrival in, or departure from, the Netherlands we have counted it as a day on which he was available for work for Monoliet, because otherwise it would be impossible for him to satisfy the burden of proof.  Accordingly our figures are likely to be favourable to him.  But if there was no evidence where he was on a particular day we have, in accordance with the burden of proof, not counted it as a day available for working for Monoliet.  Necessarily in the circumstances these figures should be taken to be what we consider to be is the right order of magnitude rather than exact figures.  On the basis that the Appellant booked on 4 June 1998 flights to spend 2 to 30 January 1999 on holiday in Barbados (although he was in fact ill there during January 1999, as explained below) our interpretation of their statistics show the following for the period from 6 April 1998 to 30 January 1999: 
	All days	Working days	
	Presence at nights	Total days present	Not available to work for Monoliet	Available to work for Monoliet	
Netherlands	130	83	5	78	
Netherlands/UK arrival and departure	-	28	24	4	
UK	82	28	28		
Dublin	3	2		2	
Portugal	4	3	3		
Le Touquet, France	5	3	3		
Brugge, Belgium	4	3	1	2	
Italy	7	6		6	
Barbados (holiday)	47	35	35		
Isle of Man (holiday)	3	4	4		
Paris (holiday)	3	3	3		
Unknown	11	11	11		
Total	299	209	117	92	

		Notes to the Table
(a)	The first column of figures shows the number of nights spent in each country by the Appellant.  The remaining columns all show normal working days, excluding weekends and public holidays in the Netherlands.  Apart from days of arrival and departure between the UK and the Netherlands, which are dealt with separately, we have included days of arrival and departure to all other places in the number of days there but the following notes show whether we have included any of them as available for work for Monoliet.
(b)	The figure for days in the UK or the Netherlands are full days.  We have accepted the Appellant’s evidence that he was not available for work for Monoliet on the following days: Friday 12 June 1998 when he bought a train ticket at 10.50 to Schiphol, met his wife and spent the weekend in Amsterdam; Friday 14 August 1998 (train ticket at 0900 from Dordrecht) and Monday 17 August 1998 (train ticket at 1350 from Schiphol to Dordrecht); 10 September 1998 (train ticket to Schiphol at 1341) and 11 September 1998 when his wife visited him. 
(c)	For days of arrival and departure between the UK and the Netherlands we have assumed that an early start from, or late arrival in, the Netherlands meant that the day was not available for work for Monoliet (this includes says where his departure from the Netherlands was by plane at 0725 (four times), 1125 (twice), 1225, trains tickets from Dordrecht purchased at 0630, 0653, 0658, 0700, and a ferry at 0730; and where his arrival in the Netherlands was by plane from the UK at 1225, 1825, train tickets from Schiphol bought at 1437, 1613, 1650, 1654, 1825, 2058, and the shuttle at 1530).  As explained above, where there was no information about the time of departure or arrival we have accepted these are days available for work for Monoliet unless he accepted that they were not, which he did for 30 September 1998 (the day before a Bison board meeting which he would have spent reading the papers for the meeting).
(d)	Dublin 15-18 May 1998 [weekend plus the days of arrival in Dublin (on which there was evidence of spending at 0721 in Schiphol) and departure (time unknown)] for a construction industry golf day which we accept as being at least in part for Monoliet and treat both working days as being available for Monoliet. 
(e)	 Portugal 25-29 June 1998 [1 working day plus weekend plus arrival (from UK) and departure (1915 flight)] which the Appellant said was to visit a machinery factory (the name Tensyland or Pensyland was given) near the Spanish border when he stayed four nights (Friday to Monday) in Praia Da Luz, which is 95 km west of Faro, to which he flew, and the Spanish border is 65 km to the east of Faro.  We do not accept that he was visiting a factory on the basis that he stayed in a holiday resort in the opposite direction from Faro to where he says the factory was, and that the trip included a weekend.  There is no reference to such a factory anywhere else.   
(f)	Le Touquet, France 24-28 September 1998 [2 working days plus day of arrival (driving from the Netherlands so we have not treated it as a day available for work for Monoliet; there is no information about the time of departure but he would have driven back to the Netherlands] which the Appellant says was to meet the Chief Executive of the Bildersberg group of hotels, for which Bison had done work in the UK.  We consider that any contact with the Bildersberg group was on behalf of Bison rather than Monoliet, as Bison had done work for them and the Appellant also told us that Monoliet was only in the housing market as the commercial market required pre-stressed concrete (and we accept as he would know about this).  We do not accept the Appellant’s evidence that this was a business trip for Monoliet.  He paid for petrol at Drongen (near Ghent), Belgium personally, which could be, as he suggested, because the garage did not take the company fuel card, but we consider it more likely that it was because he regarded it as a personal expense. 
(g)	Belgium 19-23 November 1998 [1 working day plus arrival and departure, times unknown] where the Appellant stayed probably with his wife in Brugge (Bruges) since there is a record of a journey on Le Shuttle from Folkestone on Thursday 19 November 1998 which is more likely to have been by his wife as the Appellant was in the Netherlands the previous day.  The visit lasted over the weekend until Monday 23 November 1998, which we do not accept as relating to Monoliet business.  However, since we do not know the times of arrival and departure we are prepared to treat them as days available for work for Monoliet as Bruges is not a long way from Dordrecht.  There is no evidence that he visited Echo at the same time (he said that Echo was at “Oosterhouse” (but if this is Oosterhout it is in the Netherlands and less than 12 km from Breda, which he must have known) but according to their website (which we took the liberty of looking at in view of the Appellant’s statement) they have always been at Houthalen, which is near Hasselt in the direction of Maastricht and in a completely different direction from Brugge coming from Dordrecht.  By 1 October 1998 the Bison board had already agreed that “T M Treanor was requested to proceed as quickly as possible to obtain further information and try and obtain an agreement with the supplier with a view to ordering a machine in the very near future” (see minute 98.55 at paragraph 7(33) below), which suggests that it was more likely that Mr Treanor than the Appellant would visit Echo and, even if the Appellant did go, any such visit would be earlier than 19 November 1998.
(h)	Italy 27 November 1998 to 4 December 1998 [4 working days plus days of departure and arrival in the Netherlands] visiting Nordimpianti with Mr Treanor and Mr Wright (but not Mr Schrale), although there are three nights hotel charges that he paid personally suggesting that he added a holiday, but given the Appellant’s difficulty of proving what he was doing at the time we accept the whole visit as being at least in part for Monoliet as Monoliet could have adopted the same machinery.  The production techniques using Nordimpianti machinery seen on this visit were intended to be adopted in the super-factory in the UK, see the heading below Super-factory in the UK and Bison minute 99.121.  In view of the importance of the machinery seen on this occasion we accept that it is possible that the visit lasted several days.  On the basis that he said that he went to Italy on 27 November 1998 we have included 30 November 1998 as a day he was in Italy although on HMRC’s list it is a day where his whereabouts was unknown.
(i)	Accordingly, on the basis of these figures, the Appellant was available to work for Monoliet on 92 working days in the period 6 April 1998 to 30 January 1999, in which case he must be treated as being on holiday for the remaining 117 working days compared to his holiday entitlement of 26 working days plus normal days of closure, which, as mentioned above, might just possibly but not, in our view, probably be interpreted to mean 46 working days.  These figures are our own working and are not exactly the same as HMRC’s ones and, as we have said, cannot be taken to be exact figures.  
(j)	It should also be noted that there are several lengthy continuous periods when he was not available to work for Monoliet, including 8 to 19 June (10 working days with only one day of departure included as available for work for Monoliet); 26 October to 16 November (16 working days with no days available for work for Monoliet), and 11 December 1998 to 31 January 1999 31 working days during which there is only 1 day plus one day of departure available for work for Monoliet).  Such lengthy periods would be unusual in a normal employment.
(14)	On the basis of the likely number of days available for working for Monoliet (or even on the basis of the maximum possible number of days) it is clear that the pattern of work is quite unlike any normal contract of employment, whether full-time or even substantially full-time; and we find that he was not employed full-time, which is relevant to s 335 ICTA 1988.  We next consider what work the Appellant was recorded as doing for Monoliet in order to determine the actual work done for Monoliet in those days available for work. 
Visits to machinery manufacturers
(15)	The Appellant said that while in the Netherlands he was visiting many different manufacturers of concrete producing machinery throughout Europe, including Echo in Belgium (which used a continuous production process involving three shifts per 24 hours), a Norwegian (the minutes refer to Finnish) plant in Wiefelstede in Germany (although Mr Schrale said it was in Belgium), which used the same concept as Echo, and that he found a process in Italy (Nordimpianti) that was suitable for Monoliet as it produced pre-stressed flooring on a continuous three shift process.  (Since the Italian process produced pre-stressed concrete it seems to us that it was more suitable for the UK factory which already produced pre-stressed concrete, but it could presumably have been used by Monoliet if it changed to pre-stressed manufacture.)  Secondly, he said that was looking for acquisition targets identified by Mr Markerink of Turnpoint BV (who had been looking for targets for Monoliet since 1994) with a view to acquiring targets with a good order book whose production could later be transferred to a super-factory.
(16)	We consider this evidence in the light of the available minutes.  The following are extracts from the minutes of Monoliet and Bison board meetings (at which the Appellant was present unless otherwise stated) and the quarterly reports prepared by Monoliet (by Mr Schrale) submitted to Bison board meetings.
(17)	In relation to manufacturing processes, the following is the only one mentioned in the Monoliet minutes or the part of the Bison minutes relating to the Concrete Products Netherlands:  
Monoliet 27 May 1998
“S D Schrale and D W Hankinson will look at the possibilities to produce prestressed shuttering slabs in the carrousel system from MBG (without girders, possibly with another, better solution).”[A carousel system was explained as one that ran for 24 hours a day, compared to the existing process used by Bison and Monoliet that manufactured one cast per day.]
(18)	Visits to Echo, and a Finnish plant in Germany and to Italy, and “a number of production facilities” are mentioned in the following minutes relating to the UK business:  
Quarterly report by Concrete Products UK for the Bison board meeting on 1 October 1998
Echo, Belgium – A visit to the factory was made by Messrs Hankinson, Schrale and Treanor. [The Appellant said that Mr Treanor did not go, but we prefer the minutes to his recollection of events of 1998].  The company manufactures machinery for R.C. hollow-core slabs on a carousel system.  We await requested information from Echo.
Bison 1 October 1998
[The following is under the heading Concrete products UK]
98.55  …D W Hankinson, T M Treanor and S D Schrale had visited a number of production facilities which offered alternative products which would meet our requirements.  Unfortunately the manufacturer of the Finnish alternative was not prepared to release any further information of its product as a result of its being in discussions with an alternative UK supplier.  The reasons for this were discussed but it was decided to proceed with obtaining further information from a Belgian manufacturer which would also meet the Group’s requirements.  [The Appellant said that Mr Treanor never visited the Finnish or the Belgian factory but we have already found in connection with the report by Concrete Products UK to the Bison board saying that he did visit at least the Belgian factory, and we find that he also visited the Finnish one and probably others as well, on the basis that the minutes are to be preferred to the Appellant’s recollection of events of 1998.  The Appellant also said in his witness statement that Echo produced reinforced rather than pre-stressed concrete flooring which did not produce a sufficient span for our (presumably meaning Mononiet’s) purposes.  We find this strange if the UK company was on the point of negotiating to order the machinery.  He said (and we accept) that the Finnish (or Norwegian) plant in Germany used the same concept as Echo.  The Appellant also mentioned visiting a manufacturer in Germany, Roth Technik, and Damman Croes in Belgium (although the list mentions this as also being for a second-hand concrete factory for Barbados, which the Appellant could not explain), both of which are on Mr Markerink’s list and we accept that the Appellant visited them.] 
98.56  …T M Treanor was requested to proceed as quickly as possible to obtain further information and try and obtain an agreement with the supplier with a view to ordering a machine in the very near future.  The machine could be located at a number of existing sites or the new Falkirk site.
Bison 7 May 1999 [the Appellant not being present]
[The following is under the heading Concrete Products UK]
99.121  …These discussions then developed into the timing and scale of any new ‘super-factory’ incorporating the new production techniques which had been demonstrated to D W Hankinson and T M Treanor on their last visit to Italy.
(19)	Our conclusion is that while it cannot be said that these processes were not relevant to Monoliet, as demonstrated by Mr Schrale’s presence, on the visits to Belgium and Germany, although, particularly in the case of Belgium, he may have been there for language reasons, the prime focus was for the UK business, as is evidenced by Mr Treanor’s presence at all three and the inclusion of references to the visits in the section of the minutes relating to the UK business.
Visits to possible acquisition targets for Monoliet
(20)	In relation to proposed acquisitions by Monoliet we have collected together the items that relate to each target.
(21)	Heembeton
“Bison 2 April 1998:
…a meeting had already been set up with Heembeton to determine whether it was willing to either sell its concrete operations or consider buying Monoliet.  
Monoliet 29 April 1998
The strategy with regard to take-over/merger with Heeembeton was discussed.
•	Price consequences
•	Funding of take-over (about £20 mln)
Possibly a new production plant could be built; against cost price (including depreciation) to ‘control’ the market.  [While we have including this as it might relate to Heembeton we consider that it is more likely to be an alternative to acquiring Heembeton, which seems to be supported by the 25 November 1998 extract below where pricing is compared between acquiring Heembeton and building a factory on a greenfield site.]
Hollow core slabs could be imported from the UK to shock the market.  A certificate of Kiwa must be arranged…
Monoliet quarterly report for Bison 2 July 1998 board meeting
During May, discussions took place with Heembeton, with regard to a possible acquisition of Heembeton.  S D Schrale already had talks, in which both parties agreed that the floor factories of Heembeton and Monoliet could complement eachother (sic) very well.
Bison 2 July 1998
98.37  Monoliet will need to determine how it wishes to proceed with regard to this competition [see minute 98.36 quoted under Monoliet’s business below] and in this respect meetings had already been held with Hembeeton (sic) with a view to acquiring its business or Hembeeton acquiring Monoliet although this could only be undertaken by acquiring the whole Bison group.  Yesterday, Hembeeton had indicated their willingness to consider selling its flooring business, albeit they would require time to produce all the necessary information.  Because of the holiday period further contact would not be made until September.
Monoliet quarterly report for Bison board meeting 1 October 1998
Heembeton: Cementbouw [Heembeton’s parent company] is still interested and wants to examine both options: sell floor factory Heembeton to Monoliet, or take-over of Bison.
Given the settlements of the take-over of Wilma and internal problems of Heembeton, Cementbouw will not be able to arrange an appointment until 15 October.
The prices are still low, which could have a good effect on the take-over price of Heembeton (works both ways).  According to the board of Heembeton, they are still making a loss in the floor department.
Bison 1 October 1998
 98.64  …This [enhancing the flexibility of the production facilities and expanding the production range beyond the housing sector] was the main reasons (sic) why discussions with Heembeton and […] had commenced.  Heembeton had not yet replied to our initial approach and S D Schrale agreed to contact them to find out the present position.
Monoliet 22 October 1998
With regard to Heembeton one will know more on 23 October.  Mr S D Schrale will contact Mr D W Hankinson with regard to Mr Redeker of Cementbouw.  
Monoliet 25 November 1998
A possible take-over of Heembeton.  Pricing compared to the starting greenfield and future strategy were discussed, on the basis of the floor market strategy until [actual word used is “uptil”] 2002.
Bison quarterly report for Bison board meeting on 22 December 1998
Heembeton.  From Heembeton rough data are known to make a bid.  Because of a lot of commotion in the organization of Heembeton, a visit that was planned from Mr D W Hankinson could not take place.  It is being considered to put down a provisional price….
Bison 22 December 1998
98.85  D W Hankinson and S D Schrale briefed the meeting as to the position with regard to Heembeton.  They had not allowed any of the Bison personnel access to the factory to determine its condition.  The acquisition of Heembeton would meet our requirements in terms of product development within the Netherlands and enable us to upgrade part of the existing Monoliet factory.  [Both the Appellant and Mr Schrale said that they visited Cementbouw on two or three occasions.  While this is possible we find it surprising that it was not mentioned in any of the minutes.]
98.84  [This minute immediately follows the one above and should presumably have been numbered 98.86] It was agreed that we should prepare a draft offer letter which would include a price of Ng 45 million (equivalent to £14.4m converted at the Revenue’s published spot rate at 31 December 1998) but be suitably qualified so that we can walk away at any time….
Monoliet 28 January 1999 [the Appellant not present]
The position with regard to Heembeton was discussed.  Other possible candidates for take-over were discussed too.
Bison 15 March 1999 [the Appellant not present]
99.100  Contact had been continuing with Cementbouw regarding the sale of Hembeeton (sic).  S D Schrale advised the meeting that it was probably more relevant to make contact with the main board rather than the directors of the subsidiary company.  This would be reviewed on G N Wright’s next visit to the company.
Monoliet 24 March 1999 [the Appellant not present]
Heembeton: through Turnpoint because of inside contacts of G Markerink.  The price of Turnpoint has to be looked at; G N Wright will come back on this item.”
(22)	In summary, Mr Schrale had already made contact with Heembeton before the Appellant arrived in the Netherlands.  The original possibility was that either Heembeton would sell or would buy the Bison Group but by 2 July it was prepared to sell.  This was Monoliet’s preferred target: “The acquisition of Heembeton would meet our requirements in terms of product development within the Netherlands and enable us to upgrade part of the existing Monoliet factory” and “both parties agreed that the floor factories of Heembeton and Monoliet could complement eachother very well.”  Meetings with the Appellant were postponed by Heembeton on many occasions and in the end nobody ever visited their factory.  By December rough figures were obtained and an offer made.  We do not find that this can have taken up any significant time of the Appellant even if he did have two or three meetings with Cementbouw. 
(23)	OBI
[OBI was one of the companies mentioned by Mr Markerink which he says he visited with Mr Schrale without the Appellant, and Mr Schrale said the same (both of which we accept). The Appellant said that he was not interested in staircase factories until they had a pre-stressed flooring plant.]
“Monoliet 28 August 1998
Cooperation with OBI was discussed, as a result of the visit that S D Schrale paid to OBI.  A new appointment will be arranged. 
Discuss with sales department:
Working in combination, multiproduct
…
•	Possibly staircases etc (OBI) 
Monoliet quarterly report for Bison board meeting 1 October 1998
OBI.  With the ‘Ossendrechtse Beton-Industrie’ the first contacts were made.  OBI does not have an own sales department and gets a lot of projects through ‘colleagues.’  OBI and Monoliet have been making appointments for a possible commercial cooperation.  In the meanwhile Monoliet is making preparations and collecting information for a possible take-over.
Bison 1 October 1998
 98.64  …This [enhancing the flexibility of the production facilities and expanding the production range beyond the housing sector] was the main reasons (sic) why discussions with […] and the staircase manufacturer [the Appellant said that this was not OBI, but we consider that it probably was in view of the description in the 24 August 1998 minutes] had commenced.  
Monoliet 25 November 1998
A meeting with OBI will be arranged, to discuss the ‘cooperation.’
Bison quarterly report for Bison board meeting on 22 December 1998
OBI.  The OBI does not want to have a cooperation with Monoliet as its order book is well filled.
Monoliet 24 March 1999 [the Appellant not present]
Take-overs: …OBI: no more contacts.”
(24)	This relates to the staircase project.  It started as a cooperation that might have led to a take-over but in the end nothing became of it.  We have already accepted the evidence of the FIR that the staircase project was a quick first acquisition project.  This is supported by the minutes showing that some contact was made with OBI with a view to an acquisition.  But even if the Appellant is right in saying that he was not interested in a staircase plant until Monoliet had pre-stressed flooring, and so the approach was premature, he would not have devoted any significant time to it, and the minutes do not suggest that he did.  He mentioned (and we accept) that he visited a nearby staircase factory to the north of Breda towards Rotterdam, which cannot be OBI which was in Ossendrecht in Belgium.
(25)	 Dycore
Monoliet 28 January 1998
“Shuttering slabs: position reasonable but with poor prices.  Dy-Core/Verwo will soon be working in two shifts and is pursueing (sic) both clients and personnel of Monoliet.  
Bison 2 April 1998
98.13  …Representatives of Dycore had requested meetings to discuss the position and S D Schrale is to compile an overall review of all the possible options with regard to the future of Monoliet and in particular the development of hollowcore and related staircase products as part of any expansion plans.
Monoliet quarterly report for Bison 2 July 1998 board meeting
At the moment Dycore Verwo is very aggressive towards Monoliet; many orders were not scored because of the price.  Probably Dycore Verwo is trying to force Bison to sell Monoliet.
Monoliet quarterly report for Bison board meeting on 1 October 1998
It is expected that in particular CRH (Dycore-Verwo) wants to force the branch to reorganisation (sic), by increasing the production and cutting down the prices with 10%.  It may be CRH’s strategy to try to force Bison to sell Monoliet.”  [We deduce that at some point CRH had acquired Dycore.]
Monoliet 22 October 1998
CRH is also interested in Monoliet.  Everything is possible for Mr D W Hankinson.  One cannot go on this way and work at losses all the time, ‘being surrounded by the big boys.’ [This seems to relate to CRH acquiring Monoliet, which it eventually did, rather than an acquisition by Monoliet.]
(26)	Dycore was described in the FIR as Monoliet’s major competitor.  Even if Dycore was intended as a cooperation leading to a take-over this did not proceed.  Mr Schrale told us (and we accept) that he told Dycore that Monoliet was interested in buying them, and they said that they were interested in buying Monoliet.  We do not find that this can have taken up any significant time of the Appellant. 
(27)	Other possible acquisition targets
Monoliet 27 May 1998
“The cooperation with Oeterbeton, a Belgian manufacturer of prestressed and traditional floors has stopped, as Oeterbeton is at the moment approaching Monoliet’s clients directly.
Monoliet quarterly report for Bison 2 July 1998 board meeting
Furthermore exploring discussions with EBM are being started.  EBM is a small hollow core slab factory with a capacity of about 300,000 m2 per year.  [The Appellant said this was a hollow-core slabs project generally; Mr Schrale that it was a staircase factory.  The Appellant said (and we accept) that he visited their factory twice.]
Monoliet quarterly report for Bison board meeting 1 October 1998
[Under the heading Outlook for 1999] The prospects for 1999 clearly depend on the started course and when a possible take over could be realized.  Should the take-overs succeed, then Monoliet will become a considerable market party and she could strongly contribute to improvement of the market prices.  If not, achieving the volumes will put a very high pressure on the contribution level.
…
A strategy is being worked on that was presented at the start of Novello [forecasts on the Phildrew acquisition]: take-overs of floor factories, and cooperations that could lead to take-overs.  Because of this Monoliet will become an allround floor supplier.
[Under the heading Recent and new developments] With three builder’s merchants, ‘Wijnands’ (south west Brabant and Limburg), ‘Stoelvan Klaveren’ (North-Holland) and ‘Vermeulen’ (Friesland) the first steps were taken to come to a commercial cooperation for small projects up about 500 m2.
Bison quarterly report for Bison board meeting on 22 December 1998
Betonindustrie Terwolde.  Betonindustrie Terwold is for sale, via the Generale Bank.  Mr D W Hankinson and Mr S D Schrale have visited the location.  [There follows a paragraph describing the company including production of various concrete elements for housebuilding, commercial building and civil engineering, but not mentioning staircases, although it is on Mr Markerink’s list as being for the staircase project.]
Hybex.  Hybex in Hoogkerk (Groningen) in the north of the Netherlands is also for sale.  Monoliet Holding’s director Mr R de Schutter has visited this company.  The information will be sent to us.  [The Appellant could not remember Mr de Schutter.]
Monoliet 28 January 1999 [the Appellant not present]
Other [the previous sentence related to Heembeton] possible candidates for take-over were discussed too.
Monoliet 24 March 1999 [the Appellant not present]
Tane-overs: 	Hybex: too far away
		Terwolde: too expensive
Prefab Veghel: possible candidate for take-over.” [This had been noted as a competitor in relation to shuttering slabs and insulated ribbed ground floors in the Monoliet report to the Bison board meeting on 2 July 1988.  The Appellant says that he visited it, which we accept.] 
(28)	Mr Schrale produced a list of companies visited which included Pekso Beton BV and Waardo BV flooring factories, Van Dijk Beton BV, a concrete elements factory, and Unidek BV, Isobouw BV and Opsialan BV [the name of the last of these is indistinct and may be wrong], insulation factories.  None of these appear to be mentioned in the minutes.  It is not clear whether the Appellant visited all of them but Mr Markerink said that the Appellant visited Pekso Beton, Unidek (a roofing product that might have been of interest to the UK companies) and Isobouw, although Mr Markerink did not.  The Appellant remembered the first two but not the third but Mr Markerink probably had a record of his visiting all three and we find that he did.   
(29)	None of these acquisitions came to anything, and there seemed to be no definite prospects even though we accept that April to December 1998 is a relatively short period to expect acquisitions to be completed.  The report for the 1 October 1998 Bison board meeting demonstrates that Monoliet was seriously looking for acquisitions for completion in 1999.  Although not recorded in the minutes the Appellant said (and we accept) that he visited some other factories that were found not to be of interest and the visit would not be recorded in the minutes.  We do not find that these possible acquisitions can have taken up any significant time of the Appellant.  In only one case, Terwolde, is the Appellant recorded in the minutes as having visited the plant, but we have accepted that he also visited EBM and some others not mentioned in the minutes.  We can also accept that the Appellant visited some customers of Monoliet in order to learn about the local market, even though there is no mention of this in his witness statement, which suggests that this was not a significant activity.  But even accepting all of this, we cannot find that in total acquisitions and visits to customers can have accounted for a significant part of the time available to him for Monoliet business.
The state of Monoliet’s business in 1998
(30)	The following are extracts from the minutes relating to the state of Monoliet’s business  
Monoliet 29 April 1998
“The order-intake is too low.  It is necessary to put pressure on the sales people.  Possibly lower prices could be used to try to score orders anyhow.
Bison 2 July 1998
98.24  Cash flows in both the UK and Netherlands, while operating within the facilities, had been affected by the increased sales in the UK and lower profits in the Netherlands.  The Netherlands cash flow had also been affected by higher stock levels.  Both these matters were being acted on the maximise cash flow.  The company still held Ng 8 million and DW Hankinson requested GN Wright to prepare a short paper as to the impact of lost interest against possible exchange gains with regard to this sum.
98.36  …The price of the core products is decreasing as some of the larger producers are reducing prices in order to maintain their market share, especially as certain producers had made significant investments in new facilities.
Monoliet 28 August 1998
3c…A strategy to meet the volume loss in insulated ground floors must be defined; to go back to 10.000 m2/week [This relates to the postponement of a Government housing project (Vinex).]
S D Schrale says that there are not enough projects [which he explained meant enquiries] in both shuttering slabs and insulated ground floors.
Finance report for the Bison board meeting on 1 October 1998
[This gives figures for the 8 months to August showing that Monoliet’s profits were £499K compared to the budget of £980K.]
Concrete Products Netherlands is still suffering from a general shortage in demand which together with excess capacity has led to a reduction in volumes and contribution.  This has resulted in a significant shortfall on budget.  
Monoliet quarterly report for Bison board meeting on 1 October 1998
The results until and including August stay behind budget and Novello.  The causes are: lower turnover, caused by volume loss due to the low orderbook, low despatch and too low sales price (contribution).  Furthermore the administration costs are still too high, due to the automation.
…
The prices for shuttering slabs did decrease with 25% and are below cost price….
The prospects for 1999 clearly depend on the started course and when a possible take over could be realized.  Should the take-overs succeed, then Monoliet will become a considerable market party and she (sic) could strongly contribute to improvement of the market prices.  If not, achieving the volumes will put a very high pressure on the contribution level.
…
A strategy is being worked on that was presented at the start of Novello [forecasts on the Phildrew acquisition]: take-overs of floor factories, and cooperations that could lead to take-overs.  Because of this Monoliet will become an allround floor supplier.
Bison 1 October 1998
98.49  …Monoliet continued to experience problems with regard to both volumes and prices and its anticipated result for the year is well below budget.
98.62  D W Hankinson explained that these tactics [other producers putting financial pressure on Monoliet] had been applied previously but it was important that we address the position in relation to the future market and take the necessary action to mitigate out losses.  He would be reviewing this in detail with S D Schrale over the next few months.
Monoliet 22 October 1998
Reduction of working hours was discussed; this is only a temporary solution.
…
It will only get worse.  Mr D W Hankinson asks for an explanation.  Causes are, among other things, the delay in the start of the Vinex locations….
Mr D W Hankinson could arrange a crew of production personnel, to fill up the hole in the complement temporarily.  It will be examined what practical problems would be, when one would be working seven days a week (three weeks work – one week off).
Moneliet quarterly report for Bison board meeting 22 December 1998
The trading results until and including November are £1.111 min behind budget….  The cash flow position will be critical until March.  For 1999 a positive result is being expected of 2.7 min…The sales have been increased in the last three months.  In januari the production will go back to normal capacity.
Finance report for Bison board meeting 22 December 1998
[The figures for Concrete Products Netherlands up to October 1998 show an actual profit of £464K compared to budget of £1,444K.]
Bison 22 December 1998
98.76  The main assumptions underlying the budget in the Netherlands [which according to the finance report for that meeting was predicting a larger turnover but smaller profit than the Novello figures at the time of Phildrew’s acquisition] was the anticipated recovery in the market as well as the overall reduction in finished goods stock.  If this did not materialise in the early part of the year then action had to be taken quickly to reduce costs significantly which would mean reducing capacity.
Bison 15 March 1999 [the Appellant not being present]
99.9  In general the market position appears to have improved from last year with the order intake remaining steady and the order book was now full up to September for both products….
Monoliet 24 March 1999 [the Appellant not being present]
In 2 months 700 K behind budget!
Monoliet 26 April 1999 [the Appellant not being present]
Contribution April uptil (sic) December is lower as the sales department is selling under the budget price.
Budget vs actual is about 1 min short.  Things must be reversed with specific tasks.  The target uptil (sic) and including June is break even.
Bison 7 May 1999
99.113  The most disappointing aspects of the month’s results was the losses incurred by Concrete Products Netherlands.
99.116  Despite the trading position, the cash position in the UK was still robust.  However, the losses in the Netherlands would necessitate further discussions with Generale Bank so as to extend further the temporary facility that had previously been agreed at Ng 9 million.
99.136  The report on Concrete Products Netherlands was summarised by S D Schrale.  The results for the period to date were obviously disappointing and in particular the losses for the month.”
(31)	The impression from all the above minutes was that Monoliet was having progressively increasing difficulties throughout the whole of this period.  No doubt the Appellant needed to be concerned about dealing with these difficulties and he probably spent more time on that than he was originally expecting to do.  Mr Schrale said that the Appellant often visited the office and factory, which are in separate buildings, in Breda, arriving at 6 am when work started on average two or three days a week.  We accept that he did visit the office and factory regularly but we cannot say whether this was as much as two or three days a week.  While Miss Simler pointed out that he never spent any money on credit cards or withdrew any money from ATMs in Breda, this could be explained by the fact that the office and factory might not be in the town where such facilities were available, about which we have no evidence.  The Appellant said (and we accept) that he could eat sandwiches provided at the Breda canteen but if he had arrived early he might return to Dordrecht for lunch.  
The Appellant’s work in the Netherlands  
(32)	We are faced with the conflict between these contemporary minutes and the Appellant’s assertion that he was working all hours on Monoliet business.  We consider that the minutes give an accurate picture of what he was doing for Monoliet. We find it surprising that in the Monoliet report for the 2 April 1998 Bison board meeting nothing was said about the Appellant’s recent arrival in the Netherlands or what he had been doing since his arrival if his presence there was central to Bison’s strategy.  If he was working on a grand plan for a super-factory in Europe one would have expected that at Bison board meetings at which the Phildrew-appointed director, Mr Hobbs, was present, he would keep the board fully informed about progress even if all there was to report was that no acquisitions could be made.  Some potential acquisitions were reported to the Bison board meetings, particularly Heembeton and, to a smaller extent, OBI, and occasionally others, such as Dycore and Terwold.  This suggests that if there had been others of any consequence they would also have been reported.  We do not, however, doubt that Monoliet was genuinely looking to make acquisitions.  We accept that because of Monoliet’s financial difficulties the Appellant would have spent some time on these but that would have been strategic advice to Mr Schrale and we do not consider that this would have taken a substantial amount of his time.  We do not accept the Appellant’s evidence that he would speak to Mr Wright once or twice a week solely on Monoliet business (Mr Wright was also a director of Monoliet); we consider it probable that he also discussed Bison business.  We therefore find that while in the Netherlands, and even while he was in Breda, the Appellant was not spending all of his time on the 92 working days available for work in the Netherlands on Monoliet’s business.  It is not necessary for us to decide what he was doing but we suspect that he was working on Bison UK business and using secretarial and communication facilities to communicate with the directors while he was there.  In addition he had a fax machine in the apartment and could communicate in this way; he did not use email.  We consider that this is another example of the Appellant starting with something that was true (that he was doing some work for Monoliet) and giving it a completely different emphasis.    
The Appellant’s work for Bison’s UK operations
(33)	The following are extracts from the minutes recording the Appellant’s work for Bison’s UK operations
Bison 7 November 1997
[The Appellant was appointed Chairman of the Remuneration Committee and a member of the Audit Committee of Bison.]
Bison 2 July 1998
“98.32  T M Treanor distributed as report on the possible operations for the relocation of the Falkirk operations.  Tomorrow, D W Hankinson, T M Treanor and G N Wright are visiting an old Tarmac site which may suit our requirements.  [The Appellant says that he knew the site and did not visit it but he took a flight to Edinburgh on 3 July 1998 and we find that he did visit the factory, which is between Edinburgh and Glasgow, and may have visited the Bank of Scotland in Edinburgh as well.  He accepted that he did visit the site between 19 August 1998 (when he flew from Schiphol to Edinburgh and saw the Loch Lomond Golf Club, see paragraph 7(40) below) and 22 August 1998 (when he flew from Glasgow to London).]
98.33 It was agreed that the board would follow any recommendations proposed by D W Hankinson and T M Treanor with regard to this site.  General discussions ensued as to the possibility of acquiring the concrete product business from Tarmac and while it was a variation in the previously agreed strategy, D W Hankinson agreed to contact and discuss this with Tarmac.  [The Appellant says that he did not do this but we consider it likely that he did.]
98.43  D W Hankinson would review the paper [relating to the retention of steel production facilities within the Structures division] before it was distributed.  It was obviously important that individual divisional strategies be incorporated into the overall group strategy and took account of other priorities within the group especially with regard to the imminent factory development within Concrete Products UK
98.44  In order to meet the year end forecast, A F Collins had proposed certain staff changes and salary increases within the present organisation.  D W Hankinson confirmed he would respond to this within the next few days.  [The Appellant told us (and we accept) that he did this in his capacity as Chairman of the Remuneration Committee.]
Quarterly report by Concrete Products UK for the Bison board meeting on 1 October 1998 (already quoted above)
Echo, Belgium – A visit to the factory was made by Messrs Hankinson, Schrale and Treanor. [The Appellant said that Mr Treanor did not go, but we prefer the minutes to his recollection of events of 1998].  The company manufactures machinery for R.C. hollow-core slabs on a carousel system.  We await requested information from Echo.
Bison 1 October 1998 (part already quoted above)
98.48  D W Hankinson expressed concern that there had been delays in implementing specific projects discussed at previous meetings.  He stressed the importance that proper action was taken following both board and divisional meetings and that he needed to be kept regularly updated in a formal manner on such matters.  As such he requested each managing director should submit a brief report monthly summarising the progress on specific developments.
[The following is under the heading Concrete products UK]
98.55  …D W Hankinson, T M Treanor and S D Schrale had visited a number of production facilities which offered alternative products which would meet our requirements.  Unfortunately the manufacturer of the Finnish alternative was not prepared to release any further information of its product as a result of its being in discussions with an alternative UK supplier.  The reasons for this were discussed but it was decided to proceed with obtaining further information from a Belgian manufacturer which would also meet the Group’s requirements.  [The Appellant said that Mr Treanor never visited the Finnish or the Belgian factory but we have already found in connection with the report by Concrete Products UK to the Bison board saying that he did visit at least the Belgian factory, and we find that he also visited the Finnish one in Germany and probably others as well, on the basis that the minutes are to be preferred to the Appellant’s recollection of events of 1998.] 
98.56  …T M Treanor was requested to proceed as quickly as possible to obtain further information and try and obtain an agreement with the supplier with a view to ordering a machine in the very near future.  The machine could be located at a number of existing sites or the new Falkirk site.
Bison 22 December 1998
98.76  D W Hankinson had reviewed all the detailed budgets and had a number of comments which need to be addressed as part of the ongoing position.
98.81  As part of this exercise [resolving problems relating to the Iver factory] D W Hankinson suggested we should review the position as possibly decentralising some of the central overheads with regard to the operational areas so as to provide greater control and support to the operations managers at each location.
98.82  …[the Appellant] would review the position [relating to contracts management] when he returns to the UK at the end of January and take the necessary action he considered appropriate in resolving the position.
Bison 15 March 1999 [the Appellant not being present]
99.88  In the absence of D W Hankinson, R Hobbs acted as Chairman.  He expressed disappointment with the results for the period and the indicative forecast for the first quarter.  He had discussed the position with D W Hankinson and both were obviously concerned at the present situation and in particular the problems arising with the Chelmsford contract.
Monoliet 26 April 1999 [the Appellant not being present]
Further specifications of the vibrators still must be made, as well as drawings for D W Hankinson, to possibly do some things in the UK.”
(34)	These minutes give some picture of the scope of the Appellant’s work for the UK companies.  Because no business records have survived we were unable to see the extent of these communications.  Although not recorded in the minutes the Appellant flew to Birmingham on 5 June 1996 to visit the Bison site in Tamworth.  The Appellant told us (and we accept) that capital expenditure by the UK companies required his approval.  He said (and we accept) that on 30 September 1998 he went to Bison’s office the day before the board meeting to read papers for the meeting, and it is probable that he did the same before other board meetings.  He also told us (and we accept) that he spoke to Mr Treanor on the telephone “fairly regularly; Mr Collins probably more,” and we have already found that the Appellant’s telephone conversations with Mr Wright once or twice a week were partly in connection with Bison business.  What is clear is that the work for Bison extended considerably beyond attending four board meetings a year which is what Deloitte & Touche were told.
Super-factory in the UK
(35)	There is no reference to a super-factory in the FIR.  The following are the references to a super-factory in the minutes, the earliest of which is long after the original discussions with Phildrew.  
Bison 7 May 1999 [the Appellant not being present]
[The following are under the heading Concrete Products UK]
“99.120  …a suitable site had now been identified in Bathgate…
99.121  …These discussions then developed into the timing and scale of any new ‘super-factory’ incorporating the new production techniques which had been demonstrated to D W Hankinson and T M Treanor on their last visit to Italy.
99.124  …Excluding land costs of such factory requirements would be I the region of £20 million to £25 million depending on the extent of any cube and reinforced hollowcore facility.  This obviously represented a significant development for the group.
99.125  After discussion, it was agreed that T M Treanor should proceed on the basis that such a factory should be developed as soon as possible and that the board was committed to this project in respect of future costs which were not included within any budget or forecast figures.
99.126  G N Wright confirmed with R Hobbs that Phildrew Ventures would be willing to support such a venture in the form of financing of such a project.  R Hobbs confirmed that this was the case, subject obviously to detailed proposals being submitted in due course.”
(36)	We do not accept that the super-factory was something that the Appellant was considering for Monoliet or for building in Europe while he was in the Netherlands.  The first reference to it is far too late.  We find that the super-factory was a project for the UK business that started after the board had found the machinery they required on the visit to Italy from 27 November to 4 December 1998.
The Appellant’s other UK interests
(37)	We had the following evidence about the Appellant’s involvement with his UK interests during the time he was in the Netherlands.
Powderhall Limited
(38)	The Appellant resigned as a director in February 1998.  Mrs Pairman became a director in August 1998.  In June 1998 it sold a property in Edinburgh for £5.4m to Fairbriar.  We infer that the Appellant was involved in the sale.  The notes to the accounts for that period record that the Appellant controlled the company at the time of the sale which Mrs Pairman said was wrong.  She said that the company was owned by Foxlea Investments Limited, which was owned as to 50% by the Appellant and as to the other 50% by Foxlea Holdings Limited (an Isle of Man company).  She said that the Appellant said that he transferred one of the shares in Foxlea Investments Limited to Foxlea Holdings Limited a company owned as to 80% by Mrs Pairman and 20% by her husband.  She said initially that the transfer was a long time before the Appellant went to the Netherlands and later that it was early in 1998.  The transfer had not been reported to HMRC.  We were informed after the hearing that in agreeing the figures the Appellant agreed that the transfer was on 1 December 1998.  The Appellant said that the transfer of shares was a gift in appreciation of her past work.  Initially Mrs Pairman said that the shares had no value although the Appellant’s tax return shows a dividend of £1,312,500 from Foxlea Investments Limited on 8 March 1999 and so Foxlea Holdings Limited would have received a dividend of the same amount.  The value has since been agreed at £2,871,432.  We find that that the accounts were correct in saying that the Appellant controlled Powderhall Limited.  In view of the contradictions in Mrs Pairman’s evidence about all these points we found her evidence unsatisfactory and we have in general not relied on it.  We should mention that the Appellant’s representatives have objected to HMRC using this further evidence but as the Appellant has agreed the facts as part of agreeing the figures we do not consider that we can avoid referring to it.  
(39)	The Appellant said that he had no property expertise, while Mrs Pairman and Mr Neale said that he had, Mrs Pairman agreeing that he had “enormous commercial property expertise.”  We reject the Appellant’s statement; he was involved in several property companies (Sandler Worldwide Corporation is listed as owning five commercial properties at this time in a letter from Deloitte & Touche to HMRC, see below) and he must have had property expertise.  
Fairbriar Group
(40)	The Appellant’s wife became a director in 1998 when the Appellant resigned and the Appellant continued to hold shares.  The only evidence of work by the Appellant for this company is a visit to the Loch Lomond Golf Club on 19 August 1998 (or more probably 20 as he flew to Edinburgh on the afternoon of 19), at the suggestion of the Bank of Scotland when he decided that Fairbriar were not interested, and we infer that he was involved in the acquisition of the Edinburgh property from Powderhall Limited.
Sandler Worldwide Corporation Limited
(41)	This was a property company owning four commercial properties at the time (including Horizon Centre acquired for £7.3m in November 1997) and in addition it acquired Avery House (in the UK) on 8 June 1998 for £2.175m.  The company was funded by loans from the D W Hankinson Liferent Trust.  There is no direct evidence of work by the Appellant but we infer that he must have been personally involved with this acquisition. 
Montrose Consultants Limited
(42)	This company employed the Appellant and hired out his services.  In February 1998 his wife replaced him as sole director and the consultancy arrangements were terminated.  There was evidence of a further payment in May 1998 of about £11,000 which Miss Simler contended was evidence of further services performed through this company.  Without more evidence we do not accept this and consider that it was more likely to be a late payment for earlier services (although contrary to the termination agreement which stated that there were no outstanding amounts owing). 
(43)	In relation to the above there is some evidence from which we have inferred some continuing involvement by the Appellant, particularly in relation to the acquisition of Avery House in June 1998, but we cannot judge how much time this would have taken.  We consider that while he was careful not remain a director of any UK companies, he was involved in frequent discussions with Mrs Pairman who was effectively looking after his interests; she said that she would speak to him two or three times a week on average.
The Appellant’s illness and his retirement from Monoliet
(44)	The Appellant booked a holiday in Barbados from 2 to 30 January 1999 travelling by Concorde.  On arrival there he was taken ill and an ambulance called and he was taken to Queen Elizabeth Hospital.  He was found to be suffering from a pulmonary embolism [we understand: a blood clot in the artery to the lung] and he had bouts of supraventricular arrhythmia [we understand: irregular heartbeat], which a cardiologist, after a test, considered was evidence of ischaemic heart disease [we understand: reduced blood supply to the heart].  He remained in hospital until 15 January 1999.  The hospital records describe him as retired but this may be no more than an assumption by the hospital from his age (59) and the fact that he was spending time in Barbados; his first name was also spelt wrongly.  We saw notes of visits by his doctor, Sir Richard Haynes on 15, 19 and 25 January, 8 February, 1 and 18 March, and 17 April 1999.  He returned to the UK on 30 April 1999.  There is no clear evidence that he was fit to travel earlier, and we therefore find that he remained in Barbados until 30 April 1999 on medical grounds.  He said that he kept in touch with Bison, speaking to Mr Wright once a week, and Monoliet, speaking to Mr Schrale once a fortnight but we are not sure to what period this relates.  
(45)	On his return to the UK he saw his GP on 4 May 1999 and a consultant chest physician, Dr John Wiggins reported on 11 May 1999 that “He is now four months after the event and is well.”  There was a meeting with Deloitte & Touche on 25 May 1999 attended by the Appellant , his wife, his investment adviser and Mrs Pairman at which they recorded:
“Derek hopes to fly out to Barbados this Friday for two weeks after seeing the Doctors on Thursday.  Depending on the Doctor’s advice, Derek may retire from Bison on grounds of ill health.  If this were to happen, we would have to accept that Derek is UK resident from 1999/2000 as the concession of split year treatment from 6 April 1999 to the date that Derek retires would not apply.  Alternatively, Derek may continue to work in Holland and, provided the number of days spent in the UK did not exceed the limits and his employment could genuinely be said to continue in a full-time capacity, it may be that Derek could be regarded as non-resident for 1999/2000.  If this was the case, gains on the sale of Avery House (and possibly Horizon Centre?) could escape tax.”
We did not see any evidence of a visit to a doctor that week.  We accept this minute as recording the state of the Appellant’s mind at the time, that retirement was a possibility but so was continuing working in the Netherlands.  He did not seem to be keen to start work again; for example, he did not attend the Bison board meeting on 7 May 1999 (see paragraph 7(30) above).  He flew to Barbados again on 28 May 1999 returning on 11 June 1999.  
(46)	On his return he saw Professor Woodcock, consultant in general and respiratory medicine on 22 June 1999 whose letter stated that “Currently he is relatively asymptomatic.  He is able to play eighteen holes of golf without any difficulty.  He has no chest pain….I think it is now safe to stop the Warfarin, but he needs to go on to regular Aspirin prophylaxis.”  He also saw a consultant cardiologist, Dr Derek Rowlands whose report of 24 June 1999 includes the following:
“Apart from the very obvious fact that Mr Hankinson is overweight there is nothing to find wrong on examination.  The heart is normal on clinical examination, the blood pressure is satisfactory and the electrocardiogram is acceptable as being within normal limits (bearing in mind his body build)…
He has no symptoms suggestive of ischaemic heart disease and I gather that his recent exercise stress test was satisfactory.  One of the main reasons for the suspicion of ischaemic heart disease relates to the ultrasound report from Barbados.  This refers to regional hypokinesia suggestive of myocardial ischaemia.  The most recent echocardiogram does not support this suggestion.  Basically, therefore there is no clinical lead at the moment to suggest that he has significant ischaemic heard disease.  I have, however, been at pains to explain to him that it certainly does not mean that he does not have underlying ischaemic heard disease…A negative exercise ECG in no way rules out the possibility of underlying ischaemic heart disease and the only way in which we could know for sure that he did not have this condition would be if he went forward for coronary angiography and was found to have arteries free from evidence of stenosing atheroma.  I explained the nature of coronary angiography fully and frankly to him and told him that it is an invasive procedure carrying a mortality rate of the order of 1 in 5,000.  Of course if he does have underlying ischaemic heart disease this would post its own ongoing mortality risk.  At the present time, however, I do not believe there is sufficient suggestion of ischaemic heart disease to warrant coronary angiography but if at any time in the future, however, he develops tightness, heaviness, squeezing or pressure in the chest or inappropriate breathlessness on exertion I that that very serious consideration would need to be given to this investigation even with a negative exercise electrocardiogram.
As far as the atrial fibrillation is concerned to the best of my knowledge there is only certain proof that he had this on the first occasion in hospital (when he had apparently confirmed pulmonary embolism)….Paroxysmal atrial fibrillation is, of course, very common and it might be related to a combination of his previous demonstrated mild hypertension, his excess weight and his weight and his relatively high alcohol consumption.  It is not a specific indicator for ischaemic heart disease and I would not have thought that there was any need for any further investigation at the present time except perhaps to check his thyroid function and certainly I do not feel there is any justification for the use of drug treatment in respect of the atrial fibrillation.”
(47)	The Appellant’s version of his illness in his witness statement says:
“On examination, Dr Rowlands discovered I had a more serious underlying heart condition relating to my irregular heartbeat.  He informed me that he could carry out a procedure known as cardiac version, but in view of my condition at the time, he advised that the procedure carried with it significant risks of a possible stroke or cardiac arrest.  He therefore felt on balance that it would be better for me to remain on medication.”
(48)	We prefer Dr Rowlands’ report as recording the full medical picture and the conclusion that the atrial fibrillation was not indicative of ischaemic heart disease and there was no need for drug treatment.  The Appellant’s understanding of the risk of coronary angiography accords with the report.  The Appellant has therefore converted the advice—that there was “no clinical lead at the moment to suggest that he has significant ischaemic heard disease” but that “it certainly does not mean that he does not have underlying ischaemic heard disease” which could be determined for sure if he had a coronary angiography, which was not worth the risk—into the opposite, that he had “a more serious underlying heart condition.”  Whether the Appellant did not fully understand what Dr Rowlands was saying, or he has deliberately tried to exaggerate his medical condition is not a point that we need to decide.  He may have felt the lack of having someone to interpret the medical advice for him to which he was accustomed in relation to professional advice (see Mrs Pairman’s comment at paragraph 7(1) above).  Because of the possibility that he misunderstood the medical advice we do not regard this aspect as indicative of lack of credibility on the part of the Appellant. 
(49)	He saw Dr Wiggins again on 21 July 1999 who reported that “A treadmill test was done in late May.  He was asymptomatic with a good blood pressure rise and he completed his target heart rate.  Interestingly he had a tachyarrhythmia following the exercise test and was kept under observation for a while; this looked like an SVT [we believe: supraventricular tachycardia, meaning fast heartbeat] and it settled spontaneously….I think therefore it would be worth initiating a trial of Verapamil to see whether this improves his exercise performance and stops his palpitations.”  The Appellant’s witness statement says “After I had completed the stress test, my heartbeat and pulse rate dropped dramatically and I was admitted into intensive case for 4 hours.”  This seems to be both an exaggeration and a misunderstanding.
(50)	The Appellant’s witness statement continues:
68.  “…my wife and I became increasingly concerned at the possible consequences of my returning to work at Monoliet.  The results of the tests carried out by Dr Wiggins and Dr Rowlands were not encouraging and had revealed a further underlying problem being the irregular heartbeat that could not be treated at that time….
70.  On my return to the UK I sought medical advice and it was explained to be a condition called Panic Attack. It was explained that this could be one of the reasons I was experiencing these symptoms.  It was further explained that these panic attacks occur when you subconsciously anticipate a health problem and feel exposed and vulnerable.
71.  Given this condition and following the embolic attack and its severity, I took stock of my position both from a health perspective and taking into account the continuing stress associated with my work.  I had long discussions with my wife, Evelyn, and we both decided that in view of the previously described conditions and my general health, it would be best if I retired from my duties at Monoliet.”
(51)	We have seen nothing in this medical evidence to support the Appellant’s retirement on grounds of ill health, and nor is there any reference to panic attacks in the evidence we saw.  We find that the last paragraph quoted is correct and the decision to retire was made by the Appellant and his wife and was not directly as a result of medical advice to do so.  The Appellant obtained a letter of 27 July 1999 from his GP, Dr Robert Green saying:
“This man, who is a patient of mine, as you may know recently suffered pulmonary embolus as a result of deep vein thrombosis while he was travelling to Barbados.  It is my considered opinion and I believe it would also be that of his Consultant, that it would be in the best interests of his health that he should retire from work.  He is continuing under consultant care and awaiting further investigations.”
We note that there is no mention of heart disease.  Without in any way wishing to suggest that Dr Green did not mean what he said, there is a suggestion that the letter was obtained specifically for tax reasons.  It was sent on 6 August 1999 by Mrs Pairman to Deloitte & Touche, who had previously advised her to obtain some medical evidence to support retirement on grounds of ill-health, saying: “Will this suffice?  It is Derek’s intention to resign from both the position in Holland and the Bison main Board on Thursday 12 August, when there is a Bison board meeting.  Please could you confirm that this course of action is appropriate.”  We do not find that on the basis of this letter alone that retirement was required on medical grounds.  He resigned as a director of Bison on 31 August 1999 according to the return to the Companies Registry.  We did not see any resignation from Monoliet, which was stated in his 1999-2000 UK tax return to have been on 15 August 1999 and is also the date given in his 1999 Dutch tax return. 
(52)	Miss Simler suggested that, while the Appellant’s illness in Barbados was, of course, genuine, he used it as a means of not having to return to the Netherlands.  We are not prepared to find this on the evidence in the light of the 25 May 1999 meeting with Deloitte & Touche, and particularly since anything that happening after 5 April 1999 is unnecessary to our decision.  We consider that the episode in Barbados caused concern to the Appellant about his health and made him want to retire even though that was not strictly necessary on health grounds.  Another factor was that his wife was against his living on his own in the Netherlands in case he had another attack. 
(53)	We should also mention that by the time of the hearing the Appellant was clearly not in good health.  He had trouble reading and needed someone to turn up the right pages for him, he was unable to give evidence on one day and needed to stop early on another.  We have endeavoured to make allowances for this when considering his evidence.  In any case we cannot expect him to remember in detail what he was doing in 1998.
Barbados house
(54)	We should record that there was a conflict of evidence about where the Appellant was staying in Barbados.  His oral evidence was that he was intending to stay with a friend but on arrival while feeling unwell he went to his own house, which was not suitable for staying in at the time not being furnished although he also said that he laid down on a chair or settee.  The ambulance was called by telephone from his house, meaning that the telephone was still connected.  Later in his evidence he said that his house was available but that he was not living in it.  After leaving hospital he said that he stayed with other friends.  His house is given as his address in the Barbados hospital records.  Mrs Pairman’s letter of 29 January 1999 however said that he was recovering at his Barbados apartment (which the Appellant pointed out was a house not an apartment).  We consider it more probable that he was staying at his own house.  Miss Simler suggested that the Appellant was trying to show that he was compelled to stay in Barbados rather than doing so out of choice.  While we find this conflict of evidence strange we are not prepared in the absence of definite medical evidence to find that his stay in Barbados until 30 April 1999 was not as a result of medical advice.  
(55)	The Appellant also claimed to be resident in Gibraltar from 2004, owning a property there from 2004 or 2005 although this had not been mentioned earlier.  We saw a letter from the Barbados Department of Inland Revenue obtained under the double taxation agreement saying that he was resident there for tax purposes in 2004, 2005, 2007 and 2008 and that he was granted immigrant status on 24 March 2006.  We do not understand why the Appellant was claiming to be resident in Gibraltar but as this relates to a time later than that with which we are concerned we do not make any findings of fact in relation to it.
The Appellant’s UK tax returns
1997-98 return
(56)	The Non-residence etc pages were completed to show that the Appellant was not resident and not ordinarily resident and was claiming split year treatment, giving the date of departure from the UK as 23 February 1998.  The form showed 300 days in the UK in the year and no days after the date of departure.  The country of residence was the Netherlands.  The additional information was “Please note client is employed abroad under a full time working contract of employment.” In relation to box 8.1 (capital gains) the additional information said “DW Hankinson Liferent Trust gains.  Full capital payment from the trust was £18,125 but split year relief claimed.” And in relation to box 18.7 (reduced payments on account) the additional information stated “Payments on account have been reduced to £50,000 each based on expected 1998/99 income from UK sources.”  The copy does not show the date of signing but the receipt date was 31 January 1999.
1998-99 return
(57)	The Non-residence etc pages were completed to show that the Appellant was not resident and not ordinarily resident and that he did not intend to live outside the UK permanently. The form showed 56 days in the UK in the year, and the country of residence as the Netherlands.  The additional information was “Employed abroad under a full time working contract of employment for the whole of the 1999 tax year.”  The additional information in the return for box 18.3 (total tax) was “Excluded income for non-resident.  There is no additional charge to tax for the year ended 5 April 1999 as all income in the tax return is excluded income.”  The date of signing was 12 January 2000 and the receipt date was 31 January 2000.
1999-00 return
(58)	This return is on the basis that he was resident and ordinarily resident in the UK.
Dutch tax status 
(59)	The Appellant was advised by Deloitte & Touche, Tax Lawyers, of The Hague on 11 March 1998 stating that their advice was on the basis that he intended to work full-time for Monoliet until at least April 1999.  They advised that residence in Dutch law was determined by facts and circumstances and that on the basis that his family were not staying in the Netherlands “it is not very likely that Dutch tax authorities will regard you as a resident of the Netherlands.”  They added “There is however always a chance that the Dutch tax authorities will regard you as a resident of the Netherlands.”  They went on to suggest that he applied for the “35% regulation”:  
“The 35% regulation is a tax incentive for employees temporarily employed in the Netherlands.  Under this regulation the employer can grant the employee a tax free allowance of 35% of the employee’s salary…The regulation has however another important advantage which you will probably be able to benefit from.  The regulation namely leaves you the choice to be regarded as a non-resident taxpayer in the Netherlands even if you are in fact a resident of the Netherlands.  As a consequence you will be taxable only on income and assets—also for the wealth tax—that actually have close ties with the Netherlands.  As far as your income tax liability is concerned this implies that you will only be taxable on the income received for duties performed in the Netherlands even though you are a resident of the Netherlands.”
(60)	On 26 May 1998 the Dutch Tax Office for Foreign Individuals/Enterprises wrote to Deloitte & Touche in The Hague saying that the Appellant qualified for the 35% income rule applied for as referred to in the Decree of the Secretary of State for Finance of 29 May 1995 No DB95/119M.  This was stated to apply to the employment by Monoliet from 1 February 1998 to 31 January 2008.  We did not see the application.
(61)	Deloitte & Touche in The Hague advised in June 1998 about social security contributions that they were in principle payable in the Netherlands but that he could apply to continue to pay UK contributions.  However, Deloitte & Touche in London advised him to pay contributions in the Netherlands “although this will be an inconvenience, it will certainly strengthen the case for non-residence in the UK.”
(62)	The Appellant did not visit the Netherlands during 1999 except for a visit primarily to clear his belongings from the flat between 16 and 21 August 1999. 
(63)	The Appellant’s 1998 Dutch tax return showed gross income of DFL 180,369, broken down as wages from Monoliet in the period 23 February 1998 to 31 December 1998 of DFL 163,754, personal benefit of a car from your employer DFL 19,723 (an appendix showed that he used the car from 23 February 1998 to 31 December 1998 for more than 30 km, that its catalogue value was DFL 96,055, and the amount included was DFL 19,723, which we assume was a figure based on an fixed annual percentage), less professional expenses DFL 3,108 = DFL 180,369.
(64)	The Appellant’s 1999 Dutch tax return showed gross income of DFL 129,625, broken down as wages from Monoliet in the period 1 January 1999 to 15 August 1999 of DFL 120,793, personal benefit of a car from your employer DFL 12,006 less professional expenses DFL 3,174 = DFL 129,625.  A note stated (in translation) “Mr Hankinson left for England on 15 August 1999 and has no further income in the Netherlands.”  This seems an odd statement since he had not been in the Netherlands at all in that year until 16 August 1999.  
Contentions of the parties on residence and ordinary residence
For the Appellant
8.	Mr Mathew argued that a change of residence was demonstrated by contrast of the individual’s past with changed habits of life. The position was principally governed by case law, which supplemented a skeletal statutory code. Cases such as Lysaght (1928) 13 TC 511 and Levene (1928) 13 TC 486 remained of undoubted significance. However, he submitted that they should be applied with due regard to the social and historical condition of the time with which they were concerned; a direct or inflexible application might lead to a conclusion at odds with contemporary behaviour. A modern approach should be taken to the issue of residence and ordinary residence. He referred to the comments of Eady J in High Tech and others v Deripaska [2006] EWHC 3276 (QB) at [13]-[14] and (in particular) at [24].
9.	Duration of stay was only one particular factor, as shown by Reid v CIR 10 TC 673 at 678. Other factors such as visits and family connection had to be weighed carefully against the actual change in lifestyle and not, as HMRC had done in their Statement of Case, weighed as if ordinary residence and even residence in the UK had qualities similar to those required to ascertain domicile. The state of “residence” was limited to an enquiry into the situation in a particular year of assessment and not about cultural, family and social connections, which were of less assistance in the context of modern conditions.
10.	The Appellant’s fundamental “connection” with the UK had greatly diminished and changed from 23 February 1998. Mr Mathew argued that on a statutory basis at least, the Appellant had acquired residence in Holland. The Appellant’s duties arising out of the Monoliet employment were performed outside the UK and his Bison role had been incidental to it.
11.	One initial test in answering the question whether the Appellant had gone to live abroad was to pose the rhetorical question: “Has he gone to live abroad?” The person putting the question should be assumed to be an informed, officious, but modern bystander. Mr Mathew submitted that in the Appellant’s case the answer would clearly be “yes”, notwithstanding e-mails, easy travel, regular telephone calls, and even if there were returns to the UK. In terms of Reed v Clark [1985] STC 323 at 346 (Nicholls J) there was a “distinct break in the pattern of his life”. In terms of s 335 Income and Corporation Taxes Act 1988 (“ICTA 1988”), the Appellant met the criteria, including the number of return days, according to HMRC’s practice at the time set out at paragraph 2.2 of HMRC’s booklet IR20.
12.	Mr Mathew argued against the “cluster facts” method of decision, in which a vast cluster of facts had been put together and had then been picked at as if each had to some degree a greater weight than the other, following which the whole thing was weighed up and a decision was made. There was something inherently unsatisfactory about this method, in that it often disguised just a mere act of discretion. He invited the Tribunal to depart from this “cluster” approach.
13.	With reference to the Special Commissioner Mr Clark’s decision in Genovese v Revenue and Customs Commissioners [2009] STC (SCD) 373 at paragraph 44, if it was to be taken as implying that there might have to be quite a period of time before ordinary residence was established, Mr Mathew would contend that this was not correct. A modern approach should be taken to the establishment of ordinary residence, allowing for the modes of communication available in the adopted country; the difference between ordinary residence and domicile, referred to in some of the cases, had to be re-emphasised. There was no doubt that the Appellant’s domicile remained in England and Wales, but he had become ordinarily resident in the Netherlands despite the limited length of his period of stay there.
14.	On the facts and by an appropriate application of case law, there could be no other conclusion than that the Appellant was not resident or ordinarily resident in the UK in the year of assessment 1998-99.
For HMRC
15.	It had been argued for the Appellant that the statutory tests and case law relating to residence must be applied in the context of modern life and suggested that, on the basis of Deripaska that “older cases” required “careful treatment”. However, the recent cases of Gaines-Cooper v Revenue and Customs Commissioners [2008] STC 1665, Shepherd v Revenue and Customs Commissioners [2006] STC 1821 and Revenue and Customs Commissioners v Grace [2009] STC 213 all demonstrated that the common law principles remained applicable.
16.	HMRC did not accept Mr Mathew’s conclusion in respect of Lysaght and Levene that the approach in Levene should be confined to giving the word “residence” its natural and ordinary meaning in contemporary terms. The Special Commissioners in Gaines-Cooper had found the “requirement to dwell permanently or for a considerable time” a relevant and useful principle in determining the question of Mr Gaines-Cooper’s residence. Mr Mathew’s assertion that the state of residence was limited to an enquiry into the situation in a particular year of assessment and not about cultural, family and social connections” was plainly inconsistent with the authorities. It was no coincidence that these principles all pointed to the Appellant being resident and ordinarily resident in the UK.
17.	It was not accepted that the Appellant satisfied s 335 ICTA 1988. Nor was it accepted that his UK duties were simply incidental. The contention that the presence of Mrs Hankinson at Foxlea Manor was irrelevant was simply wrong, as shown by Gaines-Cooper.
18.	In Mr Mathew’s argument a new initial test had been formulated: “Had he gone to live abroad?” This overlooked the possibility of dual residence and was unhelpful. The reliance on Reed v Clark was clearly misplaced: in that case, Mr Clark (in contrast to the Appellant) did not set foot in the UK during the entire tax year.
19.	Miss Simler drew attention to the Court of Appeal judgment in Grace v Revenue and Customs Commissioners [2009] EWCA Civ 1082, approving the summary of principles which Lewison J had given in his judgment.
20.	To summarise HMRC’s contentions on the facts, it had not been established that the Appellant had been working full-time for Monoliet in the Netherlands. The evidence was overwhelmingly against him in relation to working full-time in Holland in that year, not only in relation to his presence in Holland, and his continuing presence and involvement with Bison in the UK but also, when one analysed closely what contemporaneous documentary evidence there was, it simply did not support his case; he stood or fell by full-time employment in Holland.
The law
The cases
21.	As just mentioned, the following summary of relevant factors in considering residence and ordinary residence was given by Lewison J in Revenue and Customs Commrs v Grace [2009] STC 213 at [3], and was adopted by Lloyd LJ, who gave the agreed judgment in the Court of Appeal:
“[3] There was considerable agreement about the law between Ms Simler QC, appearing with Mr Nawbatt for HMRC, and Mr Gordon appearing for Mr Grace. For the moment it can, I think, be sufficiently summarised for the purposes of this case as follows:
	i) The word ‘reside’ is a familiar English word which means 	‘to dwell permanently or for a considerable time, to have one’s 	settled or usual abode, to live in or at a particular place’: 	Levene v IRC (1928) 13 TC 486 at 505, [1928] AC 217 at 222. 	This is the definition taken from the Oxford English Dictionary 	in 1928, and is still the definition in the current online edition;
	ii) Physical presence in a particular place does not 	necessarily amount to residence in that place where, for 	example, a person’s physical presence there is no more than a 	stop-gap measure: Goodwin v Curtis (Inspector of Taxes) 	[1998] STC 475 at 480, 70 TC 478 at 510;
	iii) In considering whether a person’s presence in a particular 	place amounts to residence there, one must consider the 	amount of time that he spends in that place, the nature of his 	presence there and his connection with that place: IRC v Zorab 	(1926) 11 TC 289 at 291;
	iv) Residence in a place connotes some degree of permanence, 	some degree of continuity or some expectation of continuity: 	Fox v Stirk; Ricketts v Registration Officer for the City of 	Cambridge [1970] 3 All ER 7 at 13, [1970] 2 QB 463 at 477; 	Goodwin v Curtis (Inspector of Taxes) [1998] STC 475 at 481, 	70 TC 478 at 510;
	v) However, short but regular periods of physical presence 	may amount to residence, especially if they stem from 	performance of a continuous obligation (such as business 	obligations) and the sequence of visits excludes the elements 	of chance and of occasion: Lysaght v IRC (1928) 13 TC 511 at 	529, [1928] AC 234 at 245;
	vi) Although a person can have only one domicile at a time, he 	may simultaneously reside in more than one place, or in more 	than one country: Levene v IRC (1928) 13 TC 486 at 505, 	[1928] AC 217 at 223;
	vii) ‘Ordinarily resident’ refers to a person's abode in a 	particular place or country which he has adopted voluntarily 	and for settled purposes as part of the regular order of his life, 	whether of short or long duration: Shah v Barnet London 	Borough Council [1983] 1 All ER 226 at 235, [1983] 2 AC 	309 at 343;
	viii) Just as a person may be resident in two countries at the 	same time, he may be ordinarily resident in two countries at 	the same time: Re Norris, ex p Reynolds (1888) 5 Morr 111, 4 	TLR 452; Shah v Barnet London Borough Council [1983] 1 	All ER 226 at 235, [1983] 2 AC 309 at 342;
	ix) It is wrong to conduct a search for the place where a person 	has his permanent base or centre adopted for general purposes; 	or, in other words to look for his ‘real home’: Shah v Barnet 	London Borough Council [1983] 1 All ER 226 at 236 and 239, 	[1983] 2 AC 309, 345 and 348;
	x) There are only two respects in which a person’s state of 	mind is relevant in determining ordinary residence. First, the 	residence must be voluntarily adopted; and second, there must 	be a degree of settled purpose: Shah v Barnet London Borough 	Council [1983] 1 All ER 226 at 235, [1983] 2 AC 309 at 344;
	xi) Although residence must be voluntarily adopted, a 	residence dictated by the exigencies of business will count as 	voluntary residence: Lysaght v IRC (1928) 13 TC 511 at 535, 	[1928] AC 234 at 248;
	xii) The purpose, while settled, may be for a limited period; 	and the relevant purposes may include education, business or 	profession as well as a love of a place: Shah v Barnet London 	Borough Council [1983] 1 All ER 226 at 235, [1983] 2 AC 	309 at 344;
	xiii) Where a person has had his sole residence in the United 	Kingdom he is unlikely to be held to have ceased to reside in 	the United Kingdom (or to have ‘left’ the United Kingdom) 	unless there has been a definite break in his pattern of life: IRC 	v Combe (1932) 17 TC 405 at 411.”
22.	In Grace, Lewison J had also expressed approval of the Special Commissioner Dr Brice’s summary in Shepherd v Revenue and Customs Commissioners [2005] STC (SCD) 644, describing it as “impeccable”. The relevant passage, referred to but not set out by Lewison J, is at paragraph 58 of Shepherd:
“58. From these authorities I derive the following principles: (i) that the concept of residence and ordinary residence are not defined in the legislation; the words therefore should be given their natural and ordinary meanings (Levene); (ii) that the word ‘residence’ and ‘to reside’ mean ‘to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place’ (Levene); (iii) that the concept of ‘ordinary residence’ requires more than mere residence; it connotes residence in a place with some degree of continuity (Levene); ‘ordinary’ means normal and part of everyday life (Lysaght) or a regular, habitual mode of life in a particular place which has persisted despite temporary absences and which is voluntary and has a degree of settled purpose (Shah); (iv) that the question whether a person is or is not resident in the United Kingdom is a question of fact for the Special Commissioners (Zorab); (v) that no duration is prescribed by statute and it is necessary to take into account all the facts of the case; the duration of an individual's presence in the United Kingdom and the regularity and frequency of visits are facts to be taken into account; also, birth, family and business ties, the nature of visits and the connections with this country, may all be relevant (Zorab; Brown); (vi) that a reduced presence in the United Kingdom of a person whose absences are caused by his employment and so are temporary absences does not necessarily mean that the person is not residing in the United Kingdom (Young); (vii) that the availability of living accommodation in the United Kingdom is a factor to be borne in mind in deciding if a person is resident here (Cooper) (although that is subject to s 336); (viii) that the fact that an individual has a home elsewhere is of no consequence; a person may reside in two places but if one of those places is the United Kingdom he is chargeable to tax here (Cooper and Levene); (ix) that there is a difference between the case where a British subject has established a residence in the United Kingdom and then has absences from it (Levene) and the case where a person has never had a residence in the United Kingdom at all (Zorab; Brown); (x) that if there is evidence that a move abroad is a distinct break that could be a relevant factor in treating an individual as non-resident (Combe); and (xi) that a person could become non-resident even if his intention was to mitigate tax (Reed v Clark).”
23.	We confirm that we have taken the principles set out in these summaries into account in our decisions below on the facts relating to the issues of residence and ordinary residence.
Legislation
24.	Although there are relatively few statutory provisions dealing with residence and ordinary residence, ss 334 and 335 of the Income and Corporation Taxes Act 1988 (“ICTA 1988”) are particularly relevant to the Appellant’s circumstances:
“334 Commonwealth citizens and others temporarily abroad
Every Commonwealth citizen or citizen of the Republic of Ireland—  
	(a) shall, if his ordinary residence has been in the United 	Kingdom, be assessed and charged to income 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
	(b) 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, or from 	any trade, profession, employment or vocation in the United 	Kingdom or elsewhere.”
“335 Residence of persons working abroad
(1) Where—
	(a) a person works full-time in one or more of the following, 	that is to say, a trade, profession, vocation, office or 	employment; and
	(b) no part of the trade, profession or vocation is carried on in 	the United Kingdom and all the duties of the office or 	employment are performed outside the United Kingdom;
the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use.
(2) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom.”
25.	Section 2(1) of the Taxation of Capital Gains Act 1992 (“TCGA 1992”) provides:
“(1) Subject to any exceptions provided by this Act, and without prejudice to sections 10 and 276, a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment during any part of which he is resident in the United Kingdom, or during which he is ordinarily resident in the United Kingdom.”
By s 9(1) TCGA 1992, the expressions “resident” and “ordinarily resident” have the same meanings in that Act as in the Income Tax Acts.
Principles to be followed
26.	The statutory and common law relating to residence and ordinary residence fall within our jurisdiction, but the application of the guidance and practice set out in IR20 does not. The same is also the case for HMRC’s “Revenue Interpretation” RI 40 (see below), although we note that the approach described there brings out the factors which HMRC consider relevant to deciding whether the individual can benefit from s 335 ICTA 1988.
27.	On the basis of Lewison J’s summary quoted above, it is clear that in determining whether an individual has ceased to be resident and/or ordinarily resident in the UK, the nature of his adopted residence in another country is, to a large extent, of no assistance in arriving at a conclusion. This is because an individual can be resident in more than one country at once. The position in respect of ordinary residence is the same. The one respect in which the quality of residence in the other country may be relevant relates to s 334 ICTA 1988, which is directed to the question whether the individual has left the UK for the purpose only of “occasional residence” abroad.
28.	Mr Mathew referred to Deripaska as implying a more modern approach to the analysis of residence status. This case concerned the question of “domicile” under s 41 of the Civil Jurisdiction and Judgments Act 1982. Two conditions had to be satisfied if Mr Deripaska was to be regarded as “domiciled” in the UK. The first was that he “resided” in the UK. The second was that the nature and circumstances of his residence indicated that he had a substantial connection with the UK. However, it was not necessary to address “substantial connection” unless “residence” had been established. Eady J stressed that in the context:
‘. . . the notion of “residence” requires “some degree of permanence or continuity”.’
He held that it would not be realistic to describe Mr Deripaska as residing in the UK in the sense of having a settled or usual place of abode.
29.	We regard the Deripaska case as having a different emphasis from the present case; Eady J was not considering the shedding of a previously existing status, but the acquisition of “residence” with a degree of permanence or continuity. Mr Mathew referred in particular to the passages dealing with the transitory nature of Mr Deripaska’s visits in the context of his status as a “modern phenomenon”. However, Eady J did not appear to be suggesting that there should be any change to what he referred to as “the ordinary meaning of residence”; the difficulty which arose was in applying that ordinary meaning to the particular circumstances of Mr Deripaska’s visits to, and properties retained by him in, the UK. In Levene, Viscount Sumner said at 502:
“The words ‘resident in the United Kingdom’, ‘ordinarily’ or otherwise, and the words ‘leaving the United Kingdom for the purpose only of occasional residence abroad’, simple as they look, guide the subject remarkably little as to the limits within which he must pay and beyond which he is free. This is the more likely to be a subject of grievance and to provoke a sense of injustice when, as is now the case, the facility of communications, the fluid and restless character of social habits, and the pressure of taxation have made these intricate and doubtful questions of residence important and urgent in a manner undreamt of by Mr. Pitt, Mr. Addington or even Sir Robert Peel.”
It is clear from Viscount Sumner’s comments that changing communications and social conditions have to be dealt with in the context of reviewing residence, occasional residence and ordinary residence, but there is no suggestion that the tests to be applied should be altered in any way to take account of such changes.
30.	 Miss Simler challenged Mr Mathew’s assertion that the state of residence was limited to an enquiry into the situation in a particular year of assessment and not about cultural, family and social connections as being plainly inconsistent with the authorities. In Levene Viscount Sumner said (13 TC 486 at 501):
“It is suggested that the Commissioners misdirected themselves in point of law, because they took into account, with regard to the earlier years, conduct which only occurred subsequently. I agree that the taxpayer’s chargeability in each year of charge constitutes a separate issue, even though several years are included in one appeal, but I do not think any error of law is committed if the facts applicable to the whole of the time are found in one continuous story. Light may be thrown on the purpose with which the first departure from the United Kingdom took place, by looking at his proceedings in a series of subsequent years. They go to show method and system and so remove doubt which might be entertained if the years were examined in isolation from one another.”
31.	We accept that the present case involves the consideration of liability in respect only of one year of assessment. However, we consider that the approach referred to by Viscount Sumner, of taking more than one year’s circumstances into account, is of assistance in reviewing a case where the liability in question arises by reference to a single year of assessment. There is a degree of artificiality in confining the examination to that single year where (as will almost always be the position, and was the case here) departure from the UK is likely to have occurred during the latter part of the preceding year of assessment. Further, it is clear from such cases as the decision of the Special Commissioners in Gaines-Cooper [2007] STC (SCD) 23, in particular at paragraph 166, that cultural, family and social connections over a longer period are relevant to the question whether an individual is resident for tax purposes in the UK, and similarly to the question whether he is ordinarily resident in the UK.
32.	Mr Mathew also argued that the Appellant’s original intention characterised the stay abroad as “non-occasional” even though the period was cut short by illness. Although s 334(a) ICTA 1988 refers to “purpose”, we consider that intention is of limited relevance, even in this context, and that the purpose of the stay abroad is to be established by means of the surrounding evidence established after the event, rather than the subjective intention of the individual concerned. In our view, intention has very little, if any, relevance to the question whether an individual has ceased to be resident in the UK. There is no suggestion in the authorities, in particular either in Levene or Lysaght, that intention should be taken into account when considering residence (as opposed to occasional residence abroad). In relation to ordinary residence, Shah makes clear that the individual’s state of mind is only of very limited relevance in determining his status; see the passage cited by Lewison J in Grace at [3] x) (paragraph 21 above). Similarly, s 335 ICTA 1988 is not looking at the individual’s intention when he goes abroad, but instead whether he fulfilled the various conditions throughout the year of assessment. Thus the process to be followed is to review the facts after the event rather than to attempt to establish the state of mind of the individual at the point of departure from the UK or at some point following departure. Despite Mr Mathew’s argument to the contrary, there is no acceptable alternative to the process of taking into account all the relevant evidence, however complex and extensive, and weighing up the respective facts and factors to be considered, in order to establish their relative levels of significance to the decision to be taken.
Decision on residence
33.	As already indicated, the question for us is not whether the Appellant became resident in the Netherlands for 1998-99, but whether the change in his circumstances was sufficient to demonstrate that he had ceased to be resident in the UK before the beginning of that tax year. We review the questions in the following order: first, whether the overriding statutory provision, s 334 ICTA 1988, applies and if so, with what effect; secondly, whether (on the assumption that his residence in the Netherlands does not fall within the description of “occasional residence” as specified in s 334) he is to be treated by reference to common law principles as not having been resident in the UK for the year 1998-99; and thirdly, whether on the facts the protection of s 335 ICTA 1988 is available.
Section 334 ICTA 1988
34.	The Appellant’s witness statement confirms that his status before his departure for the Netherlands on 23 February 1998 was that of a Commonwealth citizen whose ordinary residence had been in the UK. He thus falls within the initial conditions for the application of s 334 ICTA 1988. The latter part of the section will therefore apply if it is shown that he left the UK for the purpose only of occasional residence abroad.
35.	In Combe one of the arguments put by the Revenue was that Captain Combe had left the UK for the purpose only of occasional residence abroad, so that what is now s 334 ICTA 1988 applied. Lord President Clyde acknowledged that the expression was different from “ordinarily resident” as examined in Reid, Levene and Lysaght and “resident” as examined in the later two. He said (17 TC 405 at 410):
“I should say that ‘occasional residence’ is residence taken up or happening as passing opportunity requires, in one case, or admits, in another, and contrasts with the residence, or ordinary residence, of a person who - within the meaning explained in the cases above referred to as ‘resident’ or ‘ordinarily resident’ in some place or country.”
36.	In applying this test, the physical availability of the flat in the Netherlands provided by Monoliet to the Appellant is not the principal question; as indicated in Levene and Lysaght, the test relates to the person. In Combe, Lord Clyde referred to Captain Combe’s business and residential headquarters having been permanently in New York for three years. He did not retain any property in the UK; when he visited the UK, purely for business purposes, he stayed in hotels. His visits for the three years in question were for 52, 175 and 181 days respectively. On the facts, he was held not to have been resident or ordinarily resident in the UK; the Revenue’s contention that his absences from the UK were for the purpose only of occasional residence abroad did not succeed before the General Commissioners. The Court of Session (First Division) held that there was evidence on which the Commissioners could come to their findings on the facts.
37.	In terms of s 334 ICTA 1988, we are not satisfied that the Appellant’s move to the Netherlands amounted to anything more than occasional residence abroad. As we have found, his work for Monoliet was not full-time. As we have also found (see paragraph 7(13) above), for the period from 6 April 1998 to 30 January 1999 the Appellant was in the UK for 82 whole days including nights. During 1998-99 he spent 130 nights in the Netherlands. In addition, he spent 76 days outside both the Netherlands and the UK in the period up to 30 January 1999. The total period spent in Barbados from 30 January 1999 to 5 April 1999 inclusive amounts to 66 days, so that the total days spent outside the UK amount to 272 if the 11 “unknown” days are ignored. 
38.	He retained Foxlea Manor, his home in the UK, where his wife remained except for occasions when she travelled to the Netherlands or elsewhere in Europe to visit or accompany him. Some of his visits to the UK were for the purposes of his duties as non-executive Chairman of Bison, which we have found was a more substantial commitment than the four board meetings a year mentioned to Deloitte & Touche. We consider that his retention of links to the UK (including the visits to the UK) and the limited nature of his work for Monoliet affect the nature of his stay for the period in the Netherlands; we consider that they render his residence there only “occasional”. In contrast with the position of the individual in Combe, the Appellant’s move to the Netherlands did not amount to a sufficient definite break in the pattern of his life. 
39.	As a result of the “occasional” nature of his residence in the Netherlands, s 334 renders him liable to assessment and charge to income tax on the basis specified in s 334(b). Nicholls J held in Reed v Clark [1985] STC 323 at 343 that what is now s 334 is a substantive charging provision. He also commented:
“Despite the long history of the statutory provision now reproduced as s 49 [ie now s 334], the researches of very experi	enced counsel have not revealed any reported decision in which a claim to tax has succeeded only by virtue of that provision.”
40.	In addition to the doubts which that statement implies, s 334 relates only to income tax. Section 9(1) TCGA 1992 does not in terms extend the application of s 334 to capital gains tax; s 9(1) simply adopts for capital gains tax purposes the meanings which the expressions “resident” and “ordinarily resident” have in the Income Tax Acts. As the assessment for 1998-99 relates principally to tax on capital gains, by far the majority of the amount assessed falls outside s 334, and chargeability therefore depends on the presence or absence of residence and/or ordinary residence examined under common law principles. In case, therefore, we are not correct in our conclusion that the Appellant’s residence in the Netherlands was “occasional”, or there is some doubt as to the substantive effect of s 334, and to deal with the element of the assessment relating to capital gains, we consider whether on the basis of those principles he was not resident for the year 1998-99.
Non-residence on the basis of common law principles?
41.	In assessing whether days were spent in the UK, IR20 states at paragraph 1.2 that “The normal rule is that days of arrival in and departure from the UK are ignored in counting the days spent in the UK”. However, as we have already commented, the practice set out in IR20 does not fall within our jurisdiction. In Gaines-Cooper the Special Commissioners considered that the correct approach where the practice set out in IR20 could not be taken into account was to count the nights actually spent in the UK. We have adopted this approach in the statistics which we have examined in the context of s 334.
42.	In Grace at [3] xiii) (paragraph 21 above), Lewison J emphasised the burden on an individual whose sole residence has been in the UK and who wishes to establish that he has ceased to be resident here. Following Combe, he must show that there has been a definite break in the pattern of his life: Lord Sands referred (17 TC 405 at 411) to “a distinct break” in residence.
43.	We have already referred to the 82 days which the Appellant spent in the UK in 1998-99. Foxlea Manor remained available for his use throughout the year. In Cooper v Cadwalader (1904) 5 TC 101 the taxpayer spent two months each year in the rented house with shooting rights. His occupation was referred to as “substantial” and, as regards some of its incidents, “continuous”. Was the Appellant’s occupation of Foxlea Manor “substantial” and “continuous”? It was more intermittent than in Cadwalader. However, based on HMRC’s schedule showing the analysis of days spent in the UK, it is clear that over the nine months to the end of December 1998, the Appellant spent an average of two or more weekends per month in the UK, whether or not the whole of that time was spent based at Foxlea Manor. The average of days spent in the UK over that period of just under nine months was nine per month.
44.	In Cadwalader the Lord President commented (5 TC 101 at 106):
“A master mariner, having a house in the United Kingdom, in which, when at home, he resides personally, and in which, when he was absent, his wife and family continued to reside, was held liable to be assessed or Income Tax as a ‘resident in the United Kingdom,’ in re Young, 12 S.L.R. 602, 1 Tax Cases 57, and the fact of his absence from the United Kingdom during the year of assessment was held not to relieve him from liability. If a person continues to have a residence in the United Kingdom, he is resident there in the sense of the Acts, Rogers v Inland Revenue, 16 S.L.R. 682, 1 Tax Cases 225. A person may have more than one residence, if he maintains an establishment at each. Further, it is not necessary that the trade or business or other source of income, of the person sought to be charged, should be carried on or exercised in this country.”
45.	Based on the authorities cited by the Lord President, our conclusion is that the pattern of the Appellant’s visits to the UK during 1998-99, taken together with the retention of Foxlea Manor where his wife continued to reside throughout that year, is sufficient to demonstrate that he remained resident in the UK for that year. However, we need also to take into account whether, in terms of the view expressed in Combe, there was a sufficient definite break in the Appellant’s pattern of life, even if his work in the Netherlands for Monoliet was not full-time. As we have already concluded in the context of s 334 ICTA 1988, the Appellant’s move to the Netherlands did not amount to a sufficient definite break in the pattern of his life.
46.	As Dr Brice indicated in Shepherd, citing Reed v Clark, a person could become non-resident even if his intention was to mitigate tax. The Appellant’s position in respect of intention appears to have been the same. There is clearly no objection to doing so if the individual’s change of residence status is properly established. Although we have found that the Appellant’s prime reason for moving to the Netherlands was to save tax, our decision on his residence is not influenced by that motivation. In any event, the question whether an individual is or is not resident is one of fact, to be determined after the event on the basis of the relevant facts established by the evidence, and does not depend on the individual’s intention.
Section 335 ICTA 1988
47.	We have acknowledged that HMRC’s practice as disclosed in “Revenue Interpretation” RI 40 does not fall within our jurisdiction. However, RI 40 does contain an indication of the factors likely to be relevant in assessing whether an individual is working in full-time employment abroad. Although we are not bound by them, we have been aware of them in the process of arriving at our view on the status of the Appellant’s employment with Monoliet. They accord with the factors which we consider relevant to the determination of that issue. RI 40 includes the following paragraphs:
“There is no statutory definition of ‘full-time’ in this context, nor any guidance from the courts. The phrase can only therefore be interpreted in accordance with its ordinary, non-technical meaning. Where an individual is working ‘full-time’ in an employment will always depend upon the particular facts of the case.
In general terms, where a job involves a standard pattern of hours and an individual is putting in what a layman would clearly recognise as a full working week, [the Revenue] would accept it as full-time. There is no fixed minimum number of hours for this purpose, but 35–40 hours is obviously a typical UK working week.
Some jobs, however, do not have a straightforward structure. There may, for example, be a mixture of round-the-clock working followed by a rest period; or, in the case of sportsmen, days of playing and training interspersed. Some jobs may not have a formal structure with any fixed number of working days. In deciding whether such jobs are full-time employments, [the Revenue] would look at the nature of the job, and, where appropriate, would take account of local conditions and practices in that particular occupation. Someone who had several part-time jobs overseas concurrently might also be accepted as being in full-time employment. If, for example, they had several appointments with the same employer or group of companies, it might be reasonable to aggregate the total time spent on them for the purposes of the full-time test. This approach could also apply where an individual was simultaneously engaged in employment and self-employment abroad.
Where a person has a main employment abroad but also works in the UK in some unconnected occupation (for example, as director of a family company), [the Revenue] would need to consider whether the extent of the UK activities might cast any doubt on the full-time nature of the main employment outside the UK. Again, [the Revenue] would have to look at the facts of the particular case in reaching a decision.”
48.	We concluded on the facts that the Appellant’s employment with Monoliet was not full-time, and with the benefit of the above guidance we reach the same conclusion.  Accordingly, he cannot rely on s 335 ICTA 1988 and therefore the availability of Foxlea Manor as a place of abode maintained in the UK for his use is not to be ignored in determining the question of his residence.
Conclusion on residence
49.	We find that the Appellant was resident in the UK for the year 1998-99. Although this is sufficient for the purposes of the assessment, we also consider whether the Appellant was ordinarily resident in the UK for all or part of that year.
Decision on ordinary residence	
50.	In the same way as for residence, the question for us is not whether the Appellant became ordinarily resident in the Netherlands for 1998-99, but whether the change in his circumstances was sufficient to demonstrate that he had ceased to be ordinarily resident in the UK before the beginning of that tax year. The meaning of “ordinarily resident” is given in Shah in the citation referred to by Lewison J in Grace at [3] vii) (see paragraph 21 above).
51.	We have found that the Appellant’s residence in the Netherlands was “occasional” in nature, and have already cited the comments of Lord President Clyde in Combe (17 TC 405 at 410). Thus occasional residence elsewhere is not sufficient to demonstrate a change in
“. . . the regular order of a man’s life, adopted voluntarily and for settled purposes”,
which Viscount Sumner in Lysaght (13 TC 511 at 528) specified as the characteristic of ordinary residence.
52.	In Reed v Clark at 345 Nicholls J commented that in the forerunner to s 334 ICTA 1988, occasional residence is the converse of ordinary residence. It is clear that the contrast in s 334 to which both Nicholls J and Lord President Clyde were referring was between occasional residence abroad and ordinary residence in the UK.
53.	In Shah, [1983] 2 AC 309 at 342D Lord Scarman said:
‘I agree with Lord Denning MR that in their natural and ordinary meaning the words mean “that the person must be habitually and normally resident here, apart from temporary or occasional absences of long or short duration”’
Thus Lord Denning had also considered (in a case dealing with the question of acquisition of ordinary residence status rather than the shedding of such status) that temporary or occasional absences abroad were not inconsistent with the retention of ordinary residence status in the UK; Lord Scarman shared that view.
54.	On the basis of our finding that the Appellant’s residence outside the UK (ie in the Netherlands and, if it amounted to residence, elsewhere) during 1998-99 was occasional in nature, we do not consider that the Appellant had ceased to be ordinarily resident in the UK before the beginning of 1998-99. As we have found, in contrast with the position in Reed v Clark [1985] STC 323 at 346, there was not a “distinct break” in the pattern of the Appellant’s life.
55.	Mr Mathew referred to the Genovese case. This is not directly relevant here because, as we have indicated, the question is whether the Appellant had ceased to be ordinarily resident in the UK, not whether he had become ordinarily resident in the Netherlands. However, we accept Mr Mathew’s argument that no time limit for the establishment of ordinary residence should be regarded as implied by that decision.
IR20
56.	The following are the relevant parts of the Inland Revenue’s booklet Residents and Non-residents, IR20, applicable at the relevant time:
“2.2 If you leave the UK to work full-time abroad under a contract of employment, you are treated as not resident and not ordinarily resident if you meet all the following conditions
•	your absence from the UK and your employment abroad both last for at least a whole year
•	during your absence any visits you make to the UK
- 	total less than 183 days in any tax year, and
-	average less than 91 days in a tax year. (The average is taken over the period of absence up to a maximum of four years…Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.)
2.3 …
If there is a break in full-time employment, or some other change in your circumstances during the period you are overseas, we would have to review the position to decide whether you still meet the conditions in paragraph 2.2.  If at the end of one employment you returned temporarily to the UK, planning to go abroad again after a very short stay in this country, we may review your residence status in the light of all the circumstances of your employment abroad and your return to the UK.
…
Meaning of full-time
2.5 There is no precise definition of when employment overseas is ‘full-time’, and a decision in a particular case will depend on all the facts.  Where your employment involves a standard pattern of hours, it will be regarded as full time if the hours you work each week clearly compare with those in a typical UK working week.  If your job has not formal structure or no fixed number of working days, we will look at the nature of the job, local conditions and practices in the particular occupation to decide if the job is full-time.
If you have several part-time jobs at the same time, we may be able to treat this as full-time employment.  That might be so if, for example, you have several appointments with the same employer or group of companies, and perhaps also where you have simultaneous employment and self-employment overseas.  But if you have a main employment abroad and some unconnected occupation in the UK at the same time, we will consider whether the extent of the UK activities was consistent with the overseas employment being full-time.”
The Treaty
57.	 Having decided that the Appellant was ordinarily resident in the UK during 1998-99 it becomes necessary to consider whether for the purposes of the Treaty he was resident in the UK or the Netherlands.  We are concerned with a capital gain made in March 1999 which falls within the UK tax year 1998-99 and the Dutch tax year 1999, the overlap being 1 January to 5 April 1999 (“the overlap period”).
58.	On the approach to the interpretation of tax treaties generally we quote and adopt the following passage of the Special Commissioners’ decision in Smallwood v HMRC [2008] STC (SCD) 209:
“94. In IRC v Commerzbank AG [1990] STC 285 at 297–298 in a passage approved by the Court of Appeal in Memec plc v IRC [1998] STC 754 at 766, 1 ITLR 3 at 20, Mummery J summarised the approach to treaty interpretation laid down by the House of Lords in Fothergill v Monarch Airlines Ltd [1981] AC 251, [1980] 2 All ER 696 in the following way:
‘(1) It is necessary to look first for a clear meaning of the words used in the relevant article of the convention, bearing in mind that “consideration of the purpose of an enactment is always a legitimate part of the process of interpretation”: per Lord Wilberforce ([1981] AC 251 at 272) and Lord Scarman (at 294). A strictly literal approach to interpretation is not appropriate in construing legislation which gives effect to or incorporates an international treaty: per Lord Fraser (at 285) and Lord Scarman (at 290). A literal interpretation may be obviously inconsistent with the purposes of the particular article or of the treaty as a whole. If the provisions of a particular article are ambiguous, it may be possible to resolve that ambiguity by giving a purposive construction to the convention looking at it as a whole by reference to its language as set out in the relevant United Kingdom legislative instrument: per Lord Diplock (at 279).
(2) The process of interpretation should take account of the fact that—“The language of an international convention has not been chosen by an English parliamentary draftsman. It is neither couched in the conventional English legislative idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and more varied judicial audience than is an Act of Parliament which deals with purely domestic law. It should be interpreted, as Lord Wilberforce put it in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [[1987] AC 141 at 152], ‘unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation’”: per Lord Diplock (at 281–282) and Lord Scarman (at 293).
(3) Among those principles is the general principle of international law, now embodied in art 31(1) of the Vienna Convention on the Law of Treaties, that “a treaty should be interpreted in good faith and in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”. A similar principle is expressed in slightly different terms in McNair's The Law of Treaties (1961) p 365, where it is stated that the task of applying or construing or interpreting a treaty is “the duty of giving effect to the expressed intention of the parties, that is, their intention as expressed in the words used by them in the light of the surrounding circumstances”. It is also stated in that work (p 366) that references to the primary necessity of giving effect to “the plain terms” of a treaty or construing words according to their “general and ordinary meaning” or their “natural signification” are to be a starting point or prima facie guide and “cannot be allowed to obstruct the essential quest in the application of treaties, namely the search for the real intention of the contracting parties in using the language employed by them”.
(4) If the adoption of this approach to the article leaves the meaning of the relevant provision unclear or ambiguous or leads to a result which is manifestly absurd or unreasonable recourse may be had to “supplementary means of interpretation” including travaux préparatoires: per Lord Diplock (at 282) referring to art 32 of the Vienna Convention, which came into force after the conclusion of this double taxation convention, but codified an already existing principle of public international law. See also Lord Fraser (at 287) and Lord Scarman (at 294).
(5) Subsequent commentaries on a convention or treaty have persuasive value only, depending on the cogency of their reasoning. Similarly, decisions of foreign courts on the interpretation of a convention or treaty text depend for their authority on the reputation and status of the court in question: per Lord Diplock (at 283–284) and per Lord Scarman (at 295).
(6) Aids to the interpretation of a treaty such as travaux préparatoires, international case law and the writings of jurists are not a substitute for study of the terms of the convention. Their use is discretionary, not mandatory, depending, for example, on the relevance of such material and the weight to be attached to it: per Lord Scarman (at 294).'
95. Article 31 of the Vienna Convention on the Law of Treaties, 23 May 1969, 1155 UNTS 33 (‘the Vienna Convention’) referred to in this quotation provides as follows:
‘1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c) any relevant rules of international law applicable in the relations between the parties.
4. A special meaning shall be given to a term if it is established that the parties so intended.’
…
98. The treaty is based on the OECD model tax convention of 1977. The OECD model has a commentary explaining the terms of the model which is accordingly an important means of interpretation of the model and treaties following the model. Although not the subject of argument in this appeal, we are aware that there is academic literature discussing how the commentary fits into arts 31 and 32 of the Vienna Convention. Our view is that the negotiators on both sides could be expected to have the commentary in front of them and can be expected to have intended that the meaning in the commentary should be applied in interpreting the treaty when it contains the identical wording. This is as much true of the United Kingdom which is a member of the OECD as it is of Mauritius, which is not. The difference is that the United Kingdom had the opportunity of stating that it disagreed with any part of the commentary by making an observation, while Mauritius did not, although the commentary does now contain observations by a number of non-OECD member countries, but not including Mauritius. The main treaty interpretation issue here is over the meaning of 'place of effective management' in art 4(3). If the commentary contains a clear explanation of the meaning of the term it seems clear that the parties to the treaty intended that such explanation should be more important than the ordinary meaning to be given to the terms of that phrase. This is either on the basis that the existence of the model and commentaries demonstrate that the parties intended it as a special meaning within art 31(4) of the Vienna Convention, or that the Vienna Convention does not purport to be a comprehensive statement of the method of treaty interpretation. Its own commentary states that 'Accordingly the [International Law] Commission confined itself to trying to isolate and codify the comparatively few general principles which appear to constitute general rules for the interpretation of treaties' (Introduction para (5)). The commentary has been referred to in a number of decisions by the United Kingdom courts. 
59.	Article 4 of the Treaty provides:
“1. For the purposes of this Convention, the term ‘resident of one of the States’ means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests cannot [be] determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;
(d) if he is a national of both States or of neither of them, the competent authorities of the States shall settle the question by mutual agreement.”
60.	In the High Court in Smallwood Mann J gave the following guidance on the application of the tie-breaker:
“[41] Both sides referred me to the OECD model convention, on which the treaty is based, together with the official commentary on that and the additional commentary on those works of Philip Baker QC in his manual on Double Taxation Conventions and International Tax Law (3rd edn, 2001). I am afraid that I did not find most of those citations helpful, because they tended not to address the points that I have to decide. Accordingly, I do not reproduce most of those citations here. However, in his commentary Mr Baker said (at pp 4–2/10 to 4–2/11):
'The Convention and the Commentary give little guidance as to the temporal application of Article 4(1) and the tie-breaker tests in Article 4(2) and (3), that is the scenario where a person changes residence during the relevant period of time.'
[42] That, of course, is less than helpful to a consideration of the present case. He goes on to give examples of an individual shifting residence during the course of overlapping tax years in two separate countries with an alienation of an asset in one state during the period of overlap, and goes on:
'The starting point to resolve this issue is Article 4(1). Domestic law determines whether a person is a resident of a Contracting State; it must also determine the period during which the person is a resident. Thus, for example, if both states adopt a split-year approach—dividing the tax year into a resident part and a non-resident part—there is no difficulty: the taxpayer is resident in State A until [one date] and in State B thereafter.
However, if both states regard the person as resident throughout the respective tax year, then there is a period of dual residence—[in the overlapping period, in his example]—and the tie-breakers come into play. The question which then arises is the period of time over which one applies the tie-breakers.
Take, for example, the first tie-breaker in Article 4(2)(a)—the availability of a permanent home. Does one ask in which state the taxpayer had a permanent home:
(a)     only on the date when the alienation took place …
(b)     throughout the period of dual residence …
(c)     throughout the two states’ tax years which overlap …?'
[43] Unfortunately for this case, he does not hazard an answer to that question. However, his analysis does support part of my reasoning above. He distinguishes between cases where both states adopt a split-year approach, and where they adopt what might be called a 'deemed residence' approach. In the former case there is apparently no tie to break. That is in fact the case before me. What the commissioners did in their decision was to create the second without any statutory justification. The statute does not deem the trustees to have been resident in any part of the tax year other than that in which they were actually resident within the meaning of the taxing statute. It seeks to charge gains made at any time in that year, which is different. The answer to Mr Baker's unanswered question is, on the facts of this case, answer (a), for the reasons given above.”
With regard to the last point, Mr Baker’s book goes on to say:
“The issue is particularly acute for the tie-breaker in Article 4(2)(b)—habitual abode—which refers to the state in which the longer period of residence occurs.  Paragraph 19 of he Commentary explains that the comparison must be made over a sufficient period of time for it to be possible to determine where the residence is habitual.”
It seems therefore that while one applies the tie-breaker at the time of alienation in a case concerning capital gains, this does not mean that one cannot look at a longer period in applying the elements of the tie-breaker when appropriate, which it may not be for permanent home, but it is necessarily for habitual abode.
61.	We regard the words in the first sentence of art 4(1) of the Treaty as describing liability to tax on the basis of residence (“by reason of his domicile, residence, place of management or any other criterion of a similar nature”) as opposed to liability on a source basis.  This interpretation is also supported by the second sentence, even though the OECD Commentary explains that this relates to diplomats.  The quoted words may also exclude liability to tax on some basis that does not fall within the quoted words (in Smallwood at [101] the Special Commissioners instanced liability of trustees on the basis that the settlor was resident, and there could be cases affecting individuals such as being on a register of residents without setting foot in the state in the year).  
62.	In relation to the UK our finding that the Appellant was resident and ordinary resident means that he is “under the laws of that State, is liable to tax therein by reason of his… residence” (in the context meaning the act of residing).  
63.	So far as the Netherlands is concerned the only evidence we have is the advice from Deloitte & Touche in the Hague that residence in principle is a question of facts and circumstances and that in view of the Appellant’s wife not living in the Netherlands while he was working full-time (as they were instructed) in the Netherlands “it is not very likely that Dutch tax authorities will regard you as a resident of the Netherlands.”  During 1999 he spent only five days in the Netherlands to collect his belongings from the apartment after the employment contract had apparently been terminated.  We have no hesitation in deciding as a fact, even in the absence of any expert evidence on Dutch law, that the Dutch authorities would not regard him as a resident of the Netherlands.  In any case he was treated as a non-resident under the Decree of the Secretary of State for Finance of 29 May 1995 No DB95/119M.
64.	 Mr Mathew contends that one should look at the Appellant’s Dutch residence in general principle and not in accordance with the Decree, which is an optional provision of Dutch law.  We do not agree.  The Decree is a part of Dutch law for deciding whether he is “under the laws of that State, is liable to tax therein by reason of his domicile, residence etc.”  The fact that it is necessary to make an application before the Decree has effect does not mean that it is irrelevant to such liability to tax.  In any case we have decided that in 1999 he would on general principles be a non-resident even without the effect of the Decree.  Accordingly we find that the Appellant was a resident of the UK and not of the Netherlands for the purpose of art 4(1).
65.	This makes it unnecessary for us to deal with art 4(2) but we will briefly deal with it.  We are concerned with the situation at the time of making the gain in March 1999 during the overlap period, throughout which he was in Barbados as a result of his illness. 
66.	The OECD Commentary (1977) applicable when the Treaty was entered into contains the following:
“13. As regards the concept of home, it should be observed that any form of home may be taken into account (house or apartment belonging to or rented by the individual, rented furnished room). But the permanence of the home is essential; this means that the individual has arranged to have the dwelling available to him at all times continuously, and not occasionally for the purpose of a stay which, owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel, educational travel, attending a course at a school, etc.).
14. If the individual has a permanent home in both Contracting States, paragraph 2 gives preference to the State with which the personal and economic relations of the individual are closer, this being understood as the centre of vital interests. In the cases where the residence cannot be determined by reference to this rule, paragraph 2 provides as subsidiary criteria, first, habitual abode, and then nationality. If the individual is a national of both States or of neither of them, the question shall be solved by mutual agreement between the States concerned according to the procedure laid down in Article 25.
 15. If the individual has a permanent home in both Contracting States, it is necessary to look at the facts in order to ascertain with which of the two States his personal and economic relations are closer. Thus, regard will be had to his family and social relations, his occupations, his political, cultural or other activities, his place of business, the place from which he administers his property, etc. The circumstances must be examined as a whole, but it is nevertheless obvious that considerations based on the personal acts of the individual must receive special attention. If a person who has a home in one State sets up a second in the other State while retaining the first, the fact that he retains the first in the environment where he has always lived, where he has worked, and where he has his family and possessions, can, together with other elements, go to demonstrate that he has retained his centre of vital interests in the first State.
… 
 17. In the first situation, the case where the individual has a permanent home available to him in both States, the fact of having an habitual abode in one State rather than in the other appears therefore as the circumstance which, in case of doubt as to where the individual has his centre of vital interests, tips the balance towards the State where he stays more frequently. For this purpose regard must be had to stays made by the individual not only at the permanent home in the State in question, but also at any other place in the same State.
 18. The second situation is the case of an individual who has a permanent home available to him in neither Contracting State, as for example, a person going from one hotel to another. In this case also all stays made in a State must be considered without it being necessary to ascertain the reasons for them.
19.  In stipulating that in the two situations which it contemplates preference is given to the Contracting State where the individual has an habitual abode, subparagraph (b) does not specify over what length of time the comparison must be made.  The comparison must cover a sufficient length of time for it to be possible to determine whether the residence in each of the two States is habitual and to determine also the intervals at which the stays take place.”
67.	As to “permanent home available to him” he had a large house available in the UK, and the apartment in the Netherlands which counts as “any form of home,” at least so long as the Commentary is not making a distinction between a house and a home which does not seem to be the case in view of the reference to “rented furnished room.”  Both were available continuously at the time the gain was made during the overlap period.  The UK house may have been more substantial, but the Dutch apartment, held under an 18 month lease, was where he had been living for some 130 nights between 6 April 1998 and 2 January 1999.  We find that it was a permanent home, and accordingly he had a permanent home in both states.
68.	The next test applying in these circumstances is “the State with which his personal and economic relations are closer (centre of vital interests).”  In the light of the Commentary’s importance to personal relations his main personal relations were that his wife and at least one of his sons were in the UK and he belonged to the Lambourne Golf Club in the UK.  His economic relations were the value of his UK house and some investments in the UK and his earnings in the Netherlands, which also points in favour of the UK.  His situation is similar to the example in the last sentence of paragraph 15 of the Commentary.  From his 1997-98 tax return most of his investment income arose in Jersey and he told us that the value of his house in Barbados was about £8m.  In comparing the UK and the Netherlands we find that his personal and economic relations were much closer to the UK.  Had it been necessary to do so we would therefore have resolved his dual residence for the purpose of the Treaty in favour of the UK on this basis.
69.	The next test, “the State in which he has an habitual abode,” arises only if centre of vital interest cannot be determined and so does not arise.  In a case in the Tax Court of Canada reported after the hearing and about which neither party was therefore able to comment, Lingle v R 12 ILTR 55, Campbell J makes the point that the French equivalent to an habitual abode is où elle séjourne d'une façon habituelle which means “where one stays in an habitual way.”  He was dealing with the US-Canada treaty the official languages of which are English and French whereas we are dealing with the Treaty, which is in English and Dutch but as the French is the same in the French official version of the OECD Model we consider that it is permissible to look at it to confirm the meaning of the expression in English which is an odd use of the English language.  In the overlap period he did not stay in either state because he was in Barbados.  We find that he did not have an habitual abode in either state during the overlap period.  If it is possible to look at a longer period as required by paragraph 19 of the Commentary, such as the UK tax year 1998-99, he stayed in an habitual way in both countries (some 130 nights in the Netherlands and 82 nights in the UK, including non-working days) and the intervals were fairly evenly spaced.  We regard both of these as habitual.  We do not read this test as purely a matter of counting days in spite of the Commentary’s reference to “tips the balance towards the State where he stays more frequently” unless one is far larger than the other because the Treaty deals with the possibility of habitual abode being in both or neither state, which would virtually never arise with counting days.  We would therefore decide if it were relevant that the Appellant had an habitual abode in neither state if only the overlap period were taken or that he had an habitual abode in both states if the tax year 1998-99 were taken.
70.	Although we have decided that it does not arise, the next test is the state of which he is a national, which is the UK.
71.	In summary, under the Treaty we find that the Appellant was at the time of the capital gain resident for the purposes of the Treaty in the UK alone.  But even if he had been resident in both states the dual residence would have been resolved in favour of the UK under all of centre of vital interests, habitual abode and nationality.
The validity of the discovery assessment 
 The law
72.	Section 29 of the Taxes Management Act 1970 (as in force at the time of the discovery assessment) provides:
“(1) If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment—
(a)     that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or
(b)     that an assessment to tax is or has become insufficient, or
(c)     that any relief which has been given is or has become excessive,
the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.
(2) Where—
(a)     the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, and
 b)     the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed,
the taxpayer shall not be assessed under that subsection in respect of the year of assessment there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.
(3) Where the taxpayer has made and delivered a return under section 8 or 8A of this Act in respect of the relevant year of assessment, he shall not be assessed under subsection (1) above—
(a)     in respect of the year of assessment mentioned in that subsection; and
(b)     ... in the same capacity as that in which he made and delivered the return,
unless one of the two conditions mentioned below is fulfilled.
(4) The first condition is that the situation mentioned in subsection (1) above is attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf.
(5) The second condition is that at the time when an officer of the Board—
(a)     ceased to be entitled to give notice of his intention to enquire into the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment; or
(b)     informed the taxpayer that he had completed his enquiries into that return,
the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.
(6) For the purposes of subsection (5) above, information is made available to an officer of the Board if—
(a)     it is contained in the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment (the return), or in any accounts, statements or documents accompanying the return;
(b)     it is contained in any claim made as regards the relevant year of assessment by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim;
(c)     it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer, whether in pursuance of a notice under section 19A of this Act or otherwise; or
(d)     it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above—
(i)     could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or
(ii)     are notified in writing by the taxpayer to an officer of the Board.
(7) In subsection (6) above—
(a)     any reference to the taxpayer's return under section 8 or 8A of this Act in respect of the relevant year of assessment includes—
(i)     a reference to any return of his under that section for either of the two immediately preceding chargeable periods; and
(ii)     where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any partnership return with respect to the partnership for the relevant year of assessment or either of those periods; and
(b)     any reference in paragraphs (b) to (d) to the taxpayer includes a reference to a person acting on his behalf.
(8) An objection to the making of an assessment under this section on the ground that neither of the two conditions mentioned above is fulfilled shall not be made otherwise than on an appeal against the assessment.
(9) Any reference in this section to the relevant year of assessment is a reference to—
(a)     in the case of the situation mentioned in paragraph (a) or (b) of subsection (1) above, the year of assessment mentioned in that subsection; and
(b)     in the case of the situation mentioned in paragraph (c) of that subsection, the year of assessment in respect of which the claim was made.”
Facts relating to the discovery issue
73.	The facts known to the officer from the tax returns are set out in paragraphs 7(56) and 7(57) above, were that the Appellant was “employed abroad under a full time working contract of employment.”  There were no other relevant documents and there was no further information that could reasonably be expected to be inferred from the tax returns.  No further information was available by the end of the enquiry window for the 1998-99 return on 31 January 2001.
74.	By the time the discovery assessment was made on 24 January 2005 the officer had two ring binders of additional information including in particular the following: (a) a copy of the contract of employment and details of his remuneration; (b) schedules of visits to the UK; (c) departure times of flights; (d) boarding passes; (e) two schedules, presumably prepared by HMRC showing the number of whole days in Amsterdam (sic) between 23 February 1998 and 28 May 1999 amounting to a total of either 183 or 185 days (for the tax year 1998-99 the number is 146 or 148 days); (f) a schedule, presumably prepared by HMRC showing the maximum whole days spent in Amsterdam (sic) between 23 February 1998 and 21 December 1998 amounting to 199 days (for the tax year 1998-99 the number is 162 days); (g) particulars of the Appellant’s apartment in Dordrecht; (h) that the Appellant’s wife continued to live in the UK; and (i) the Appellant’s Dutch tax return for 1998.  The flight details show the time he was in Barbados from 2 January to 28 May 1999, and there was information about how he was taken ill in Barbados.
The parties’ contentions
75.	For the Appellant, Mr Mathew argued that s 29 Taxes Management Act 1970 (“TMA 1970”) required the officer to discover both that there was a loss of tax and that s 29(2) and (3) did not prevent him from making an assessment.
76.	For HMRC, Miss Simler argued that s 29 simply provided that HMRC could make an assessment if they discovered that there was a loss of tax, but that the assessment would not have effect for the recovery of the tax assessed unless certain conditions concerning that tax loss and its disclosure were met. In considering whether the s 29(3) conditions were satisfied, she contended that the Tribunal was not limited in its consideration to what was known at the time of the assessment.
Conclusions on the discovery issue
77.	In Corbally-Stourton v Revenue and Customs Commissioners [2008] STC (SCD) 907 at paragraph 44, the Special Commissioner (Charles Hellier) indicated that a discovery was something “newly arising, not stale and old”. This was based on the statement by Viscount Simonds in Cenlon Finance Ltd v Ellwood ( [1962] AC 782 at 794) (1962) 40 TC 176 at 204:
“I can see no reason for saying that a discovery of undercharge can only arise where a new fact has been discovered. The words are apt to include any case in which for any reason it newly appears that the taxpayer has been undercharged . . .”
78.	In Langham v Veltema [2004] STC 544 Auld LJ also referred to the latter case and stated:
“[5] The discovery procedure in s 29 has its origin in earlier tax statutes and may apply where, after normal finality of an assessment, some new fact comes to light or incorrect application of the law (subject to s 29(2)) or where, for any reason, it newly appears that the taxpayer has been undercharged . . .”
79.	On the meaning of “discover”, Mr Hellier in Corbally-Stourton at paragraph 42 cited the views of the three judges in R v Kensington Income Tax Commissioners ex parte Aramayo (1913) 6 TC 279. Bray J said:
“… it would seem therefore most unlikely that the legislation should have intended by the word discover that he was to ascertain by legal evidence. It provides for a later trial, if I may call it so, the question when either party appeals. This is not the time for legal evidence, and it seems to me to be quite clear that the word ‘discover’ cannot mean ascertain by legal evidence; it means, in my opinion, simply ‘comes to the conclusion’ from the examination he makes, and, if he likes, from any information he receives.”
Avory J said:
“I think that word [discovers] means ‘has reason to believe’.”
Lush J said:
“Now if you take the word ‘discovers’ as I think it was clearly intended to be taken, as merely an alternative to ‘find’ or ‘satisfy himself’, the difficulty disappears.”
80.	Thus the process of discovery involves a Revenue officer coming to the conclusion, or having reason to believe, or finding or satisfying himself that one or more of the circumstances set out in s 29(1)(a), (b) or (c) is established. The comments of Bray J in Aramayo show that proof by way of formal legal evidence is not required. However, the comments of all three judges make it clear that the office must have some basis for arriving at the view that one or more of these circumstances is in point.
81.	In Corbally-Stourton at paragraph 42, Mr Hellier expressed the following view:
“It seems to me clear that both these judges and the legislation do not require the inspector to be certain beyond all doubt that there is an insufficiency; what is required is that he comes to the conclusion on the information available to him and the law as he understands it, that it is more likely than not that there is an insufficiency. I shall call this a conclusion that it is probable that there is an insufficiency.”
He continued in the following paragraph:
“43. It is clear however that mere suspicion, something short of a conclusion that it is probable that there is an insufficiency is not enough.”
(He had used the expression “insufficiency” as a shorthand for the contents of s 29(1)(a), (b) and (c), ie for one or more of the circumstances falling within those paragraphs.)
82.	In R v Bloomsbury Tax Commissioners [1915] 3 KB 768 at 785 Lord Reading CJ stated:
“I am therefore of opinion that it is for the Commissioners to decide whether or not a person assessed by the additional Commissioners, after ‘discovery’ by the surveyor, is in fact chargeable. But there must be information before the surveyor which would enable him, acting honestly, to come to the conclusion that a person is chargeable.”
Avory J confirmed, referring to Aramayo, that the expression “if the surveyor discovers” in the relevant legislation did not mean ascertains by legal evidence.
83.	Miss Simler contended that in Corbally-Stourton Mr Hellier had not provided any reasons for stating that the officer must come to the conclusion that it was “probable” or “more likely than not” that there was an insufficiency. Such a requirement was not supported by the passages cited from Aramayo (and applied in ex parte Hooper), nor by the comments of Auld LJ and Viscount Simonds cited above. HMRC did not accept that the officer must come to the conclusion that it was probable that there was an insufficiency; it was sufficient that there was some evidential basis for the officer’s conclusion that the taxpayer’s self-assessment was incorrect. Miss Simler acknowledged that a mere suspicion was not enough.
84.	We do not read Mr Hellier’s decision as laying down any principle different from that expressed in  Aramayo and ex parte Hooper; Lord Reading CJ’s statement cited above appears simply to require that the officer should satisfy himself on the information before him that the person in question is chargeable. This process inevitably requires the officer to assess the information and conclude whether on balance it leads him to the view that the case for “insufficiency” is made out (subject of course to the taxpayer’s right to challenge the discovery assessment on appeal). Mr Hellier emphasised that this process did not require the officer to be certain beyond all doubt that there was an insufficiency.
85.	Thus we consider the relevant test to be that the officer must have evidential basis beyond mere suspicion in order to arrive honestly at the conclusion that, on balance, there is an insufficiency. The test is subjective, in that the officer must have satisfied himself that this is the appropriate conclusion. 
86.	Mr Mathew argued that the word “may” in s 29(1) meant that, following a discovery of an insufficiency, an assessment had to be raised; the decision was not discretionary. On the basis of R v IRC, ex parte Newfields Developments Ltd [2001] STC 901 (HL), he argued that once the conditions in s 29(3) and (4) were satisfied, the word “may” had an imperative effect. Miss Simler did not accept that if a discovery was made, HMRC had to make an assessment; one example of a situation where HMRC might not make an assessment even though they had made a relevant discovery was where they had entered into a contractual or other settlement.
87.	We do not think that the context in which the word “may” is used in s 29(1) matches in any way its context in the legislation under consideration in Newfields. At [18] Lord Hoffman said:
“But the word appears in an impersonal construction—‘there may also be attributed’—and I think that its force is not facultative but conditional, as in ‘VAT may be chargeable’.”
In contrast, the word in s 29(1) appears in the phrase “the officer or . . . the Board, may, subject to sub-sections (2) and (3) below, make an assessment . . .” This is not an impersonal construction. In our view, the word “may” confers a discretion on HMRC. We accept Miss Simler’s contention that HMRC might in certain circumstances decide not to raise an assessment following a discovery.
The restrictions imposed by s 29(2) and (3)
88.	Section 29(1) is restricted in its operation by the words “subject to subsections (2) and (3) below”. Mr Mathew argued that the test to be applied to the discovery, namely that the officer must have had pertinent material before him on which to found his decision, which must be a reasonable conclusion drawn from that material, applied equally to the restrictions imposed by s 29(2) and (3) on the making of an assessment under s 29(1). Miss Simler argued that the latter analysis appeared to conflate the different sub-sections in s 29 and in particular s 29(1) and (3). She contended that s 29(1) was a subjective test: the officer must consider that there was a loss of tax before an assessment could be made. In contrast, s 29(2) and (3) presupposed that there was a loss of tax: this was the “situation” to which they (directly or indirectly) referred. They provided that if the taxpayer had made a self-assessment, HMRC could not recover the tax by assessment unless it arose through fraud or negligence (s 29(4)) or HMRC were not sufficiently alerted to it (s 29(5)). The test in respect of both s 29(4) and s 29(5) was an objective test, as confirmed in respect of s 29(5) by the Court of Appeal in Langham v Veltema at [33] and [34] (Auld LJ).
89.	Before considering the parties’ respective arguments on the relationship between s 29(1) and the restrictions contained in s 29(2) and (3), we review the latter two provisions and other related sub-sections.
90.	As indicated above, the power to make a discovery assessment under s 29(1) is subject to the operation of s 29(2) and (3). For s 29(2) to be relevant, the taxpayer must have made and delivered a return, and the “situation” mentioned in s 29(1), ie the insufficiency, must be attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed. If those conditions apply, the taxpayer is not to be assessed under s 29(1) if the return was in fact made on the basis [of] or in accordance with the practice generally prevailing at the time when it was made. (Despite the apparent suggestion to the contrary in Miss Simler’s argument referred to above, these are the only conditions relevant to s 29(2), and s 29(4) and (5) are concerned only with the application of s 29(3).) We consider below whether the initial requirement in s 29(2), that the insufficiency was attributable to an error or mistake in the return, was fulfilled in the Appellant’s case; if not, the “prevailing practice” restriction in s 29(2) cannot apply. We also consider what prevailing practice may on the facts of his case have been relevant.
91.	Turning to s 29(3), its effect is to preclude an assessment in a case where the taxpayer has made a self-assessment return unless either of two conditions is fulfilled. The first is set out at s 29(4), that the insufficiency is attributable to fraudulent or negligent conduct on the part of the taxpayer, or of some person acting on his behalf. For HMRC, Miss Simler indicated that it would only be that if HMRC failed to establish that the condition in s 29(5) was fulfilled that we would need to consider whether s 29(4) was satisfied. There was no suggestion on HMRC’s part that there had been any fraudulent conduct by the Appellant. However, they did contend that he was negligent, and that this issue was relevant to the penalty appeal. We consider below whether on the facts of the Appellant’s case negligent conduct was involved.
92.	The second condition referred to by s 29(3) is contained in s 29(5). This provides:
“The second condition is that at the time when an officer of the Board—
	(a) ceased to be entitled to give notice of his intention to 	enquire into the taxpayer's return under section 8 or 8A of 	this Act in respect of the relevant year of assessment; or  
	(b) informed the taxpayer that he had completed his enquiries 	into that return,
the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.”
93.	This sub-section is supplemented by s 29(6) and (7). In Corbally-Stourton at paragraph 55, referring to passages cited from Langham v Veltema in the Court of Appeal and from Henderson J in Revenue and Customs Commissioners v Household Estate Agents Ltd [2008] STC 2045, Mr Hellier indicated that the reference in s 29(5) to “an officer” was not to a particular officer of the Board but to “an” officer; the test was more theoretical than personal. The passages which he had quoted made it clear that s 29(5) was concerned with the objective awareness of an officer rather than the actual awareness of a particular officer. The judgments made it clear that the purpose of s 29(5) was to confine the relevant material to that in s 29(6). There would be no point in such a restriction if actual awareness by an officer that he could, on the basis of other information, have assessed was enough.
94.	We accept and confirm Mr Hellier’s final comment at paragraph 59 of his decision that the test is the objective awareness of an officer and not the objective awareness of the officer who made the assessment. In the earlier part of that paragraph he set out the approach which he considered should be taken to s 29(1) and 29(5): Miss Simler referred to this as the “two-stage approach to s 29(5)”, which had been followed by Lord Bannatyne in Pattullo [2009] ScotCS CSOH 137 at [101]. Miss Simler challenged Mr Mathew’s argument that s 29 required HMRC to discover both that there was an insufficiency and that s 29(2) and (3) did not prevent them from making an assessment. As we read Mr Mathew’s argument, he was not arguing that the latter elements needed to be the subject of a discovery, but instead that the officer had to be satisfied as to the matters mentioned in s 29(2), and that the requirements described in s 29(4) and (5) were fulfilled.
95.	The difficulty with Mr Mathew’s argument is that it would require the officer who makes the discovery assessment to consider whether it was precluded by any of the restrictions or conditions contained in s 29(2), (3) (4) or (5). The test applying to the making of a discovery is subjective, and as confirmed by the cases referred to above, the tests applying to those restrictions or conditions are objective. Our view is that the objective nature of those tests removes them from consideration by the particular officer who makes the discovery. They are matters to be tested in deciding whether the discovery assessment has been properly made. In relation to the two conditions mentioned in s 29(3), ie s 29(4) and (5), there is specific provision for challenging an assessment; s 29(8) provides:
“An objection to the making of an assessment under this section on the ground that neither of the two conditions mentioned above is fulfilled is not to be made otherwise than on an appeal against the assessment.”
(There is no corresponding provision relating to s 29(2); we comment on this below.)
The ability to challenge the assessment in this way provides the safeguards referred to by Park J in Langham v Veltema [2002] STC 1557 at [10]-[15], as analysed by Henderson J in Household Estate Agents at [29]. The discussion of burden of proof in the latter case at [43]-[50] implies that the raising of objections to the making of a discovery assessment is a process to be carried out after the assessment has been made, rather than imposing on the officer who makes the assessment the task of examining potential objections.
96.	If Mr Hellier was implying at paragraph 59 of Corbally-Stourton that the officer making the discovery assessment needed to consider whether (at the time when further opportunity for enquiry ceased to be available) an officer could not reasonably be expected to have concluded that it was probable that there was an insufficiency, we do not share that view. Subject to amending it to refer to evidential basis beyond mere suspicion in order to arrive honestly at the conclusion that, on balance, there is an insufficiency, we accept the validity of his second test, but only for the purpose of examining after the event whether the discovery assessment has been validly made.
97.	We think that the words “the taxpayer shall not be assessed under that sub-section” in s 29(2) and the corresponding words “he shall not be assessed under sub-section (1) above” in s 29(3) do not mean that the officer is precluded from making a discovery assessment in the first instance; the words provide a means of testing whether the safeguards set out in s 29(2) to (5) preclude the assessment from taking effect in the taxpayer’s particular circumstances, subject to the incidence of the burden of proof as referred to by Henderson J in Household Estate Agents.
98.	We therefore do not accept Mr Mathew’s argument that s 29 required the officer to discover that there was a loss of tax and to be satisfied that s 29(2) and (3) did not prevent him from making an assessment.
99.	Miss Simler argued that in considering whether the s 29(3) conditions were satisfied, the Tribunal was not limited in its consideration to what was known at the time of the assessment. For the reasons which we have already given in relation to Mr Mathew’s argument, we accept that the review is not confined to the information which was available to the officer making the discovery assessment at the time when he made it. In respect of s 29(4), no specific time limit is mentioned. If fraudulent or negligent conduct is alleged, it will be necessary to examine the information covering the whole period up to the point of the taxpayer’s final opportunity to correct matters by informing HMRC. In relation to s 29(5), a specific time limit is provided; the information under review is that made available to “an” officer before the closure of the enquiry window. As confirmed in Household Estate Agents at [48], this “objective non-awareness test”, in respect of which the burden of proof rests on HMRC, is to be dealt with on the basis of the return and accompanying documents which have been submitted to HMRC. Thus the examination to be carried out in respect of s 29(5) is of such documentation as at the time when the enquiry window closed.
100.	On the question of the relationship between s 29(2) and the remainder of s 29, in Household Estate Agents at [45] Henderson J commented that paragraph 45 of Schedule 18 to the Finance Act 1998 needed only to be considered in a case where the conditions of either paragraph 43 or 44 of that Schedule were satisfied. (Paragraph 45 corresponds to s 29(2), and paragraphs 43 and 44 correspond respectively to s 29(4) and s 29(5).)  Although s 29(2) may appear to be self-standing, we consider that the words “subject to subsections (2) and (3) below” in s 29(1) mean that s 29(2) is an additional protection in a case where either the condition in s 29(4) or that in s 29(5) has been shown to be fulfilled. If neither of those conditions were to be fulfilled, it would not be necessary for the taxpayer to rely on s 29(2). Our view is reinforced by the consistency which this construction bears to the corresponding provisions in Schedule 18. It also provides an explanation for the absence of any reference in s 29(8) to s 29(2).
Our conclusion on the facts
101.	We find that, as a result of newly discovered material in the form of information (see paragraph 74 above) not made available in the Appellant’s 1998-99 tax return, the Revenue officer who made the discovery assessment did have evidential basis beyond mere suspicion in order to arrive honestly at the conclusion that, on balance, there was an insufficiency. In particular it is inconsistent with being “employed abroad under a full time working contract of employment” that he spent only 183 or 185 days (as the officer then thought) in the Netherlands during the tax year, even taking into account the fact of his illness.  Miss Simler asked us to make an additional finding in the alternative, to allow for the possibility that our view as to the applicable test under s 29(1) TMA 1970 might not be upheld. We therefore find that the officer was entitled to say, on the balance of probabilities, that there was an insufficiency as a result of newly discovered material in the Appellant’s case.
102.	Having concluded that the officer was entitled to make the discovery assessment, we consider whether the assessment is precluded by s 29(2) or (3). As suggested by Miss Simler, we consider first whether the condition in s 29(5) TMA 1970 is fulfilled, then whether that in s 29(4) is fulfilled, and finally consider whether s 29(2) applies.
103.	The information made available to HMRC before the closure of the enquiry window was that set out at paragraph 7(57) above.  No enquiry under s 9A TMA 1970 was made in respect of the year 1998-99, and therefore the enquiry window closed on 31 January 2001. The tax return for 1998-99 did not disclose that the Appellant had been in Barbados for the period from 2 January 1999 until after the end of that tax year, and had not returned to the Netherlands during that tax year after his departure on 21 December 1998 so had not been in a position to do much if any work for Monoliet after that date until at least the end of that tax year, nor did it disclose the existence of his illness. Beyond the description of his contract as a “full-time working contract of employment” (which, as we have found, was not specifically provided in the Monoliet contract), there was no further information as to the terms of his contract, the hours worked, or the number of days spent in the Netherlands, and no indication of his concurrent role as non-executive Chairman of Bison and any work relating to his other investments.
104.	Without the disclosure of these additional items of information, we find that on the basis of the Appellant’s 1998-99 return an officer could not reasonably have been expected, as at 31 January 2001 when the enquiry window closed, to have been aware of the insufficiency. There was no evidence of any information as to these matters having been provided by or on behalf of the Appellant between the submission of that return and the closure of the enquiry window.
105.	Thus one of the conditions specified in s 29(3) TMA 1970 is fulfilled. This is sufficient to confirm the validity of the discovery assessment, but we consider also the position under s 29(4), and finally whether there is any basis on which the Appellant can rely on s 29(2).
106.	There was no suggestion that the Appellant’s conduct was fraudulent. Was it negligent? In taking advice from Deloitte & Touche, the extent of the prospective employment had been discussed. Mrs Pairman had asked whether the involvement in the Dutch business needed to be full-time, and at the meeting on 20 June 1997 Deloitte & Touche had advised that if the full-time employment could be established, it would not be necessary for Mrs Hankinson to move offshore at the same time. The Appellant confirmed a number of matters under cross-examination. These were that he understood the importance of being accurate and complete in what he told his advisers when seeking legal or tax advice, that advice could only be based on the facts which he gave his tax adviser, and that if he did not give his adviser the full facts, the adviser could not be expected to give him accurate and correct advice. He also accepted that it was fundamental to his claim to be non-resident that he genuinely and actually worked full-time under a contract of employment for the tax year 1998-99. He knew that unless he had worked for a full tax year on a full-time basis in Holland, he could not rely on paragraph 2.2 of IR20 to support his claim for non-residence. 
107.	The Appellant also confirmed under cross-examination that he had told Deloitte & Touche that the position with Monoliet in Holland would be a full-time job as recorded in paragraph 7(8) above, but had not gone into the details of what he would be doing. We find that his view as to what amounted to full-time employment differed materially from the ordinary meaning, the description at paragraph 2.5 of IR20, and also that in RI 40. In cross-examination he expressed the view that employment for 25 hours a week could be full-time. He believed that the law in the UK was that work for 20 hours a week would be classified as part-time, although he could not point to a specific piece of legislation to justify this. He suggested that if he put in between 10 and 16 hours a day for three days, that would come out as 40 hours per week over those three days and would amount to full-time employment. We find that whatever his belief as to the applicable law, he must have been aware of the specific description of the principles at paragraph 2.5 of IR20. An irregular pattern of hours would require to be considered by HMRC. We find that when taking advice in advance of his move to Holland, the Appellant told Deloitte & Touche that his non-executive Chairman role for Bison would only involve four Board meetings a year, whereas Mrs Pairman acknowledged that this description would have been an insufficient account of what the Appellant would be doing. There is no evidence that the Appellant gave his tax advisers any further information up to the point at which his tax return was prepared for his signature.
108.	In relation to the combination of work for Bison and the Appellant’s personal investments with the work which he carried out for Monoliet during the hours actually worked, the second part of paragraph 2.5 of IR20 indicated that it would also have been necessary for HMRC to consider the question “whether the extent of the UK activities was consistent with the overseas activities being full-time”.
109.	We find that the Appellant was aware of the existence and importance of IR20. We also find that he knew or ought to have known when signing his tax return for the year 1998-99 that he had not been working full-time in the Netherlands (or at least outside the UK), that he was only available to work for Monoliet for (on our best estimate) 92 out of 209 working days between 6 April 1998 and 30 January 1999, that he had been unable to work through illness for over three months of the year, and that his work for Bison and his other investments called further into question whether his work for Monoliet could be described as full-time. On this basis, we find that his conduct in signing the return in the form which it took, without then providing the information as to the time actually worked on Monoliet business and the time worked on Bison business and his other investments while outside the UK, amounted to negligent conduct within s 29(4) TMA 1970. Thus both of the conditions referred to in s 29(3) are fulfilled.
110.	The remaining possible defence to a discovery assessment is under s 29(2). Mr Mathew argued that the “error or mistake” in the Appellant’s return was that it was completed on the basis of the extra-statutory practice found in the 1996 edition of IR20, as applied by HMRC in explanatory notes and guidance as well as the tax return form itself, whereas the position at law was different.
111.	The nature of error or mistake specified in s 29(2) is “as to the basis on which his liability ought to have been computed”. Mr Mathew argued that in a number of respects the practice contained in IR20 diverged from case law and statute. None of these in our view affected the basis on which the Appellant’s liability ought to have been computed. It is clear from IR20 that if an individual goes to work abroad and such employment is not full-time, or is combined with unconnected work in the UK, that individual cannot assume that HMRC will treat him as neither resident nor ordinarily resident for the tax year in question. This does not differ from the position as based on case law and statute. Thus the requirement in s 29(2)(b) is not met.
112.	Although that is sufficient to dispose of the argument that the Appellant was protected by s 29(2), we consider (in case we are held to be incorrect in our view as to s 29(2)(b)) whether the Appellant’s return was made “on the basis or in accordance with the practice generally prevailing at the time when it was made”. We think not. The return was submitted on the basis that his employment with Monoliet was full-time. As we have found, it was not, and his commitment to Bison was more substantial than the limited number of Board meetings which he attended in the UK. There is no “practice generally prevailing” which could justify the completion of his return on the basis of describing his non-UK employment as “full-time”. IR20 makes it clear at paragraph 2.5 that the employment abroad must be a full-time one and that the position can be called into question if the role is combined with a separate occupation in the UK.
113.	In summary, in respect of the validity of the discovery assessment, we hold that it was validly made, that both conditions in s 29(3) TMA 1970 were met, and that s 29(2) does not apply in the Appellant’s circumstances.
Findings of fact requested by the High Court in relation to judicial review proceedings
114.	In related judicial review proceedings, R (on the application of Hankinson) v Revenue and Customs Commissioners [2009] STC 2158, Kenneth Parker QC sitting as a Deputy high Court Judge adjourned judicial review proceedings in relation to the applicability of IR20 until after our decision, saying:
[12] In the judicial review proceedings it is essential that the fact of full-time employment abroad is established by the applicant, either as a finding by the tribunal hearing the case or by agreement. That is a condition on qualification laid down by IR20. At present, according to the papers before me, HMRC are not agreeing that fact. Further, it is essential to establish that the applicant was not resident in the United Kingdom for at least 183 days, and that his return visits did not exceed the limit of 89 days laid down in IR20. Furthermore, it must be shown that he did not infringe the 'change in circumstance' condition in para 2.3 of the IR20 1996 booklet.
…
 [16] It seems to me, given the very strong linkage between the facts relied upon for the current judicial review and the facts that need to be demonstrated on the tax appeal, that the First-tier Tribunal would, in any event, have made sufficient factual findings to enable this judicial review to continue in this court. It may be the case that the focus in applying the strict letter of the law is a little different from the criteria set out in IR20 but, nonetheless, there is a very substantial overlap and I would not envisage any difficulty on the part of this court, on this judicial review, to ascertain such further facts as might prove necessary.
[17] Furthermore, Miss Simler QC, who appears today on behalf of HMRC, has undertaken that HMRC will co-operate during the course of the scheduled 10-day tax appeal to ensure that such further facts as might prove necessary for the efficient disposal of this judicial review in this court would be determined by the First-tier Tribunal.
[18] Having regard to the relevant circumstances, including the undertaking, I envisage no difficulty at all in this court hearing the judicial review as currently formulated, on the assumption that it has survived, in any event, the appeals in the cases to which I have referred and the outcome in the next tax appeal itself.
115.	All our findings of fact and inferences from those findings of fact are potentially relevant facts for the judicial review proceedings and we have already made some findings in relation to whether the tax return was made “on the basis or in accordance with the practice generally prevailing at the time when it was made.”  Here we set out our findings of fact directed specifically to whether the terms of IR20 were satisfied by the Appellant in relation to 1998-99.  The test we apply is how IR20 would be understood by a reasonable taxpayer who had read it and who had access to professional advice, and how it would be understood by a reasonable professional adviser.  We find as follows:
(1)	The Appellant did not satisfy paragraph 2.2 because he did not work full-time abroad.  IR20 necessarily gives the Revenue’s view on a normal situation, here an ordinary employee subject to supervision about the time he worked being sent abroad.  The Appellant was the most senior person associated with the group (being described as “Mr Bison”) whose family were (through trusts) interested in about 20% of the group who was not subject to any supervision.  This was not an ordinary case in which our hypothetic reader would be safe to assume was covered by the general statements in IR20.
(2)	On any ordinary meaning of “full-time” even the number of days available for working by the Appellant in the Netherlands (our best estimate being 92 out of 209 working days between 6 April 1998 and 30 January 1999) was insufficient to constitute full-time, quite apart from the fact that we have found that he was not working for Monoliet during the whole of the days when he was available to work for Monoliet.  More importantly, as stated in paragraph 2.5 whether something is full-time depends on all the facts.  This was a job with no “standard pattern of hours,” and “no formal structure and no fixed number of working days” and were thus matters on which paragraph 2.5 stated that the Revenue would look at to decide if the job was full-time.  No information was given to them to enable this to be done.  Particularly given the fact that this was not a normal employment relationship, our hypothetical reader of IR20 would have provided more information about this to the Revenue.
(3)	There was a significant break in work from 2 January 1999 to 5 April 1999 through illness or, even if one excludes the period from 2 to 30 January 1999 when the Appellant would have been on holiday in Barbados anyway, from 31 January 1999 to 5 April 1999 during which the Appellant was not even in the Netherlands.  Although the contract of employment continued, the length of time (three or two months respectively) is so long that on a reasonable reading of paragraph 2.3 it was a change of circumstance.  We appreciate that this is a matter of degree and if a person were ill for a week or two it would be reasonable to take the view that there was no change in circumstances.  More importantly by the time the tax return for 1988-89 was signed on 12 January 2000 it was clear that he was not going back to work ever again, which is a major change of circumstances that started with his illness in Barbados.  The Revenue said in that paragraph that on a change in circumstances they would have to review the position and they were never given information to enable them to do so, which our hypothetical reader would have provided to the Revenue.
(4)	The Appellant’s work for the Bison UK companies meant that he had “a main employment abroad and some unconnected occupation in the UK at the same time” within paragraph 2.5.  Had this consisted of attending four board meetings a year in the UK (as the Appellant told Deloitte & Touche, see paragraph 7(8) above), it would have been reasonable to take the view that this was consistent with the overseas employment being full-time.  But the extent of his work in the UK (not only for Bison but also for his UK investments) and the time that he was not available for working for Monoliet would on any reasonable basis have been at least something that called for giving the Revenue the opportunity of considering the question, as they stated they would want to do in paragraph 2.5 but which they were never given information to enable them to do so.
116.	 In summary our decision is that:
(1)	The Appellant was resident and ordinarily resident in the UK in the year 1988-89;
(2)	Under the Treaty he was resident for the purposes of the Treaty in the UK only, but if he had been a dual resident this would have been resolved in favour of the UK;
(3)	The discovery assessment was validly made;
(4)	We have also made some findings of fact in relation to IR20 as requested by the High Court.
117.	We confirm the assessment in the agreed figures for the total amount of tax due for 1998-99 at £30,003,607.65, and the statutory determination of ordinary residence.  
118.	The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN F AVERY JONES

JOHN CLARK
TRIBUNAL JUDGES

RELEASE DATE: 29 December 2009