[2010] UKFTT 53 (TC)

TC00366
Appeal number: SC/3043/2009

Income tax – residence – determination of ordinary residence – whether taxpayer ordinarily resident for the first three full tax years after arrival in the UK – on facts, yes – appeal dismissed

FIRST-TIER TRIBUNAL
TAX CHAMBER

	DR ANDREAS HELMUT TUCZKA	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Income tax)	Respondents

				TRIBUNAL: 	JOHN CLARK (JUDGE OF THE FIRST- 									TIER TRIBUNAL)
						NICHOLAS DEE

Sitting in public at 45 Bedford Square London WC1B 3DN on 17 November 2009

Keith Gordon and Ximena Montes Manzano of Counsel, instructed by Squire Saunders and Dempsey, for the Appellant

Akash Nawbatt of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	Dr Tuczka appeals against a Notice of Determination of Ordinary Residence in respect of the years 1998-99, 1999-2000, and 2000-01 issued by the Respondents (“HMRC”) on 7 February 2005.
The facts
2.	The evidence before us consisted of a Statement of Agreed Facts, a bundle of documents, Dr Tuczka’s witness statement dated 26 August 2009, and his oral evidence given at the hearing.
3.	As the Agreed Statement of Facts covers a substantial part of the evidence necessary to our decision, we reproduce it, subject to minor amendments of a clerical nature:
(1)	Dr Tuczka is an Austrian National who was born on 11 February 1971 in Eisenstadt, Austria.
(2)	Between 1971 and June 1989 Dr Tuczka lived in the family home in Eisenstadt (30 miles from Vienna). From June 1989 (when he went to university) he also had the use of a family-owned apartment in Vienna.
(3)	Under Austrian law (Meldengesetz, Law of Registration) every Austrian has to maintain an entry on a register showing his permanent residence. This is the address at which he is to be contacted and from which he must make himself available by law to the Austrian authorities. The entry on the register also confers electoral rights and determines the place where the individual is entitled to vote. Any departure from the address other than on a strictly temporary basis has to be notified and a new address registered. Until May 2003 Dr Tuczka was registered as being permanently resident in his home town of Eisenstadt. Dr Tuczka de-registered in 2003. There is no facility on the Meldengesetz register to record an address outside Austria and therefore from 2003 no address was recorded.
(4)	Dr Tuczka is an investment banker. In the relevant period he was specialising in mergers and acquisitions.
(5)	In 1997 Dr Tuczka was assistant to the board of Austrian Erste Bank, where he had been employed since January 1995.
(6)	In April 1997 Dr Tuczka was offered employment by SBC Warburg (later UBS Warburg, today UBS) and took up duties based in London on 1 July 1997.
(7)	Between July 1997 and May 1998 Dr Tuczka rented accommodation in London.
(8)	Dr Tuczka’s girlfriend, Sylvia Schimmerl, (who later became his wife) came to the UK in 1998 to take up an accountancy training position.
(9)	In or around February 1998, Dr Tuczka made an offer to purchase a property in Notting Hill. This offer was accepted on 20 February 1998 and the purchase was completed in May 1998.
(10)	The purchase of the Notting Hill flat was financed in part through savings and family money (£88,000) from Austria and in part by a mortgage through HSBC Midland (£65,000). The mortgage rate was fixed to July 2000 and the mortgage term was set at seven years. In December 1999 Dr Tuczka restructured the flat financing, bringing in his father as a fellow investor.
(11)	On 29 July 1998 Dr Tuczka notified HMRC on form P86 of his presence in the UK and the expected duration of his temporary stay, which he estimated (in the form) at between 2.5 and 3 years. On 12 November 1998 HMRC issued a Self Assessment tax return for 1997-98, which was completed by Dr Tuczka and lodged with HMRC on 27 January 1999. On this return, Dr Tuczka self assessed his tax residence status as Not Resident and Not Ordinarily Resident. No enquiry was raised by HMRC in relation to this return or the tax refund claim arising.
(12)	On 9 November 1998, pursuant to a reorganisation, the original employment contract with UBS Warburg was replaced by a new contract with Warburg Dillon Read, the Corporate Finance division of the Bank. The general terms, including the 4 week notice period, remained unchanged.
(13)	Self Assessment tax returns for 1998-99 and 1999-2000 were lodged with HMRC within the normal filing dates. For each year, Dr Tuczka self assessed his tax residence status as Resident but Not Ordinarily Resident. No enquiries were raised by HMRC in relation to these returns or the tax refund claims arising out of the overseas workday relief claimed.
(14)	The Self Assessment return for 2000-01 was filed on 25 September 2001. Dr Tuczka self assessed his residence status for the year as Resident but Not Ordinarily Resident.
(15)	Dr Tuczka married Sylvia Schimmerl on 10 May 2001 in Eisenstadt, Austria.
(16)	In 2002, Dr Tuczka left Warburgs.
(17)	Mrs Tuczka, who had been employed by PricewaterhouseCoopers (PwC) in the UK, took up a new post with PwC in Austria with a starting date of August 2002. She moved into the matrimonial home in Austria where she still continues to reside.
(18)	Dr Tuczka continued to work in London. In the year ended 5 April 2003, he self assessed himself as resident and ordinarily resident in the UK.
(19)	The Tuczkas’ first child, Clemens, was born in Vienna in December 2003 and their second child, Dominik, was born in August 2005, also in Vienna.
(20)	On 19 September 2002 a section 9A enquiry was notified concerning inter alia the self assessed residence status for 2000-01.
(21)	On 7 February 2005 a formal Notice of Determination of Ordinary Residence covering 1998-99, 1999-2000 and 2000-01 was issued by HMRC. A formal appeal was lodged by Haarman Hemmelrath, acting for Dr Tuczka, on 18 February 2005.
(22)	On 25 January 2006 a discovery assessment was raised for 1999-2000 charging tax of £23,247.20.Formal notice of appeal was lodged by Haarman Hemmelrath, acting for Dr Tuczka, on 26 January 2006. [Haarman Hemmelrath subsequently merged with Squire Saunders and Dempsey, the instructing solicitors.]
4.	In addition to the above agreed facts, we find the following. Dr Tuczka’s intention after working for Erste Bank in Austria was to derive international experience, with a view to his eventual return to Austria to take up a senior position with a top-tier firm there. At the point when he left Austria, he did not own any residential property, having had the use of his family’s apartment while living there from Mondays to Fridays, staying at the family home in Eisenstadt at weekends. After moving to London, he continued to use the Vienna flat whenever he was in Vienna (which was quite often) whether for work or for socialising. He kept all his personal furniture and his valuables there, including his most valuable possession, an antique clock. His use of the Vienna flat continued until at least August 2001, the point at which the new matrimonial home in Vienna had been acquired; it was not until May 2002 that his and his wife’s personal belongings (mainly books and private possessions), were moved to Vienna.
5.	The letter from SBC Warburg dated 15 April 1997, sent to Dr Tuczka in Vienna, and in which he confirmed that he would be able to start work on 1 July 1997, contained the following paragraph relating to the place of work:
“Place of Work:
You will be based at 2 Finsbury Avenue in London. You may be required to work in another capacity or elsewhere in the Bank’s group, or elsewhere in London. If the Bank should ask you to transfer to another country, the UK would be regarded as your home location and any such transfer would be subject to your agreement at the time.”
A similar provision was contained in the substituted contract issued to Dr Tuczka on 9 November 1998 by Warburg Dillon Read, which was described as a division of UBS AG. The notice period under both was a minimum of four weeks, but the later contract indicated that the criteria for notice and service were set out in the Staff Handbook. The second contract stated: “Your employment is not for a fixed term or intended to be temporary.”
6.	For his first two months in London, Warburgs provided him with temporary housing. In September 1997 he moved into a rented apartment in London E14. He described this as “very basic”; all furniture and cookery items were provided. The rent was £760 per month, which he considered an enormous amount compared to the net monthly salary for an Austrian university graduate at that time. He did not bother to decorate the flat or bring many of his personal possessions to the flat, as he knew that he was never going to spend much time there. This was both because of his extensive working hours, and because of his expectation that Sylvia Schimmerl (“Sylvia”) would eventually be coming to London.
7.	Sylvia’s university course was a degree in law at the University of Vienna, with an exchange programme at the University of Paris. In May 1998 she finished her university degree in Paris. Dr Tuczka’s view was that the flat in E14 would be unsuitable for their needs, in particular because Sylvia would be spending much more time there than he would in view of his work and business travel commitments; his work involved a considerable amount of travel abroad. We find that she had seen the E14 flat during a visit to the UK at some stage before Dr Tuczka made the offer in February 1998 to buy the property in Notting Hill, and we accept Dr Tuczka’s oral evidence that she did not like the E14 flat.
8.	Dr Tuczka’s motives for buying the Notting Hill property rather than renting another property (whether on a shorter-term or longer term basis) were purely financial, in view of the conditions in the London property market at the time. His view was that it was better to spend the “rent” on a mortgage so as to acquire ownership and benefit from some capital appreciation. His view was that once he left London, he would be able either to sell the property at a profit or to hold it as an investment and take rental income.
9.	His original financing arrangements continued until December 1999, when (in contemplation of his eventual return to Austria and the need to finance a new home as the matrimonial home) his father provided finance to enable the accrued profit in the Notting Hill property to be released to Dr Tuczka to fund the purchase of property in Vienna.
10.	From late 1997 onwards, Dr Tuczka started to travel frequently back and forth to Vienna and Paris. When his work permitted, he spent time in Vienna keeping up his social contacts; Sylvia often accompanied him.
11.	During 1999, Dr Tuczka started to devote attention to his plans to secure work in Austria for his intended departure in early 2000, after the “bonus round”. He had a series of interviews for senior posts in a variety of possible roles. However, the commercial conditions in London in late 1999 and early 2000 were such that there was a high demand for German-speaking executives. The Warburgs managers were anxious to keep Dr Tuczka, by whatever means. At the same time, his position was enhanced by taking over work from his immediate manager, who had suddenly left Warburgs. Dr Tuczka persuaded Sylvia to wait for a time, and again for a further period, and so on.
12.	Dr Tuczka’s work continued during 2000, despite a contraction in the market in Europe; from October to December he worked on projects in Hong Kong and the Far East, where the markets were still active. By the end of the year, when he returned from the Far East, he considered that he needed to “sit tight”, as redundancies were starting; the position was the same in Austria. This situation continued well into 2001. 
13.	By the end of 2001, he felt that the uncertainty was taking its toll; it was long past time to go home and he finally agreed with Sylvia to move back. As a result, in May 2002, after the annual bonuses had been paid in late March, he gave notice and resigned from Warburgs.
14.	As at that point, he described himself and Sylvia as being “ready physically, mentally and financially to end our transient connection with the UK”. Later in May 2002 when he had already left Warburgs and was on “garden leave”, he received an unsolicited job offer from ABN AMRO.  Although this was unexpected, it was not totally “out of the blue”, as it came from his former line manager at Warburgs who had left in 2000 to move to ABN AMRO. Dr Tuczka felt that the financial terms now on offer in 2002 were such that he just could not turn them down. However, the job would have a significant London element. Dr Tuczka described Sylvia as not having been particularly happy about the new circumstances. He agreed to spend as much time as possible, including weekends, in Austria.
15.	The terms which he ultimately negotiated enabled him to be based for part of the working week in Vienna. His plans to leave London completely had once again to be postponed, but Sylvia left for Vienna as planned where she set up the matrimonial home as arranged and took up employment locally in August 2002.
16.	By May 2003 Dr Tuczka considered it appropriate to de-register his notification of his Eisenstadt address to the Austrian authorities; he did not consider it appropriate to register the new Vienna home address, as from around May 2003 he regarded his London flat as his residence for the time being. His reason was that he no longer had a definite plan for terminating his employment in London with ABN AMRO. Sylvia had already registered her address as being the new matrimonial home, the registration date being 24 September 2002. Since 2003, Dr Tuczka and Sylvia have come to terms with the fact that, financially, it has made sense for him to base himself in London but for the family home to be in Vienna.
17.	Dr Tuczka accepted that with effect from 6 April 2001, he was to be classed as ordinarily resident in the UK (following the third anniversary of his arrival in the UK). This was accepted in his self assessment return for 2001-02, which was filed at some point during June 2003. [A copy of this return was not included in the bundle.]
18.	When he had completed the form P86, Dr Tuczka had responded “No” to the following question:
“4.a. Have you, or if you are married, your husband or wife had any accommodation of any description for your use in the United Kingdom in the period starting 5 years before your arrival up to the present date?”
He explained in evidence that he had misread this question as being directed at only the five year period prior to his arrival, and that this had also been the impression given to him by the Human Resources officer when he had completed the form.
Contrary to the statement in the agreed statement of facts (paragraph [3](11) above), Dr Tuczka estimated the length of his intended stay at two and a half years, with no reference to three years.
Arguments for Dr Tuczka
19.	Mr Gordon referred to the cases in which ordinary residence had been considered, in particular by the House of Lords in Levene v CIR (1928) 13 TC 486, Lysaght v CIR (1928) 13 TC 511 and Barnet LBC v Shah [1985] 2 AC 309. He also referred to the recent decision of the Special Commissioner (John Clark) in Genovese v Revenue and Customs Commissioners [2009] STC (SCD) 373.
20.	Mr Gordon submitted that Dr Tuczka’s presence in the UK was not with a settled purpose. If there was any constancy in the order of his life up to and including 2001, it was the volatility and temporariness of his presence in the UK. The only thing that was settled was the fact that Dr Tuczka was planning his way out. The fact that this took longer than expected did not in itself turn his presence in the UK into a settled purpose, particularly having regard to the facts.
21.	In his return for the year ended 5 April 2002, Dr Tuczka had self assessed himself as having become ordinarily resident from 6 April 2001. This had been based purely on HMRC’s own IR20 guidance.
22.	Arguably Dr Tuczka had become ordinarily resident in or after 2001-02 or perhaps, later, in 2003-04 when, for the first time, working in London acquired a settled purpose. This would appear to reflect his decision in 2003 to deregister his address in Austria for the Meldengesetz. However, the correctness of those later decisions was not before the Tribunal.
23.	Mr Gordon made a series of comparisons with the case of Genovese. This case and these comparisons are considered later in this decision.
24.	HMRC had stated in their Skeleton Argument that Dr Tuczka accepted that he had been resident in the UK from 1998-99 onwards. This was not the case. Nor did he accept that HMRC’s statement that he “was not a visitor to the UK”. For the first two years, Dr Tuczka had ticked the box in the return marked “Resident in the UK”; this was because s 336(2) of the Income and Corporation Taxes Act 1988 (“ICTA 1988”) required individuals to be treated, for the purposes of Schedule E, as resident if they spent in excess of six months (in practice, 183 days or more) in the UK. In the third year, ticking the box was in accordance with well-known but non-statutory HMRC practice which asserted residence once average annual presence reached 91 days. In subsequent years, notwithstanding what Mr Gordon argued was the reduced presence from 2002, tax returns were completed in accordance with the guidance in IR20; it was common ground that this was not legally binding.
25.	Although the appeal did not directly concern Dr Tuczka’s residence status for the years in question, Mr Gordon contended that it was common ground that an individual could not be ordinarily resident if he or she was not actually resident in the UK. He argued that individuals from outside the UK, but who spent considerable time in the UK, well in excess of 91 days on average, had been held to be non-resident, notwithstanding their considerable presence in the UK. He referred to CIR v Zorab (1926) 11 TC 289 and CIR v Brown (1926) 11 TC 292.
26.	He submitted that the parties did agree as to the main issues that, to be ordinarily resident in the UK:
	a. an individual must be resident in the UK;
      	b. such residence must be voluntarily adopted; and
	c. such residence had to have a settled purpose as part of the regular order of 	the individual’s life for the time being.
27.	Presence in a country for the purposes of employment could satisfy the requirement of “voluntary adoption” and Dr Tuczka did not seek to rely on that limb of the test.
28.	Mr Gordon argued on the facts that Dr Tuczka’s purpose of being in the UK did not have a sufficient degree of continuity to be properly described as settled before 6 April 2001.
29.	Review of the correspondence between Dr Tuczka (and his advisers) and HMRC showed that the only reason for the appeal having reached the hearing stage was that HMRC had clung to IR20; there had been no attempt on HMRC’s part to apply the case law, nor any attempt to consider the actual facts of the case. Mr Gordon submitted that in any event the case law did not help HMRC.
30.	Mr Gordon submitted that the evidence pointed to a conclusion that Dr Tuczka was not ordinarily resident in any of the three years under review, and asked for the appeal to be allowed.
Arguments for HMRC
31.	Mr Nawbatt submitted that Dr Tuczka had accepted that he had been resident in the UK from 1998-99 onwards but had asserted that he had not become ordinarily resident in the UK until the beginning of the year 2001-02.
32.	Dr Tuczka bore the burden of showing that he was not ordinarily resident in the UK in the years of assessment under appeal.
33.	In relation to Mr Gordon’s submission at paragraph 26 above, Mr Nawbatt indicated that the condition at point ‘a’ did not need to be fulfilled in all cases; it was not a generally applicable point.
34.	Sections 334-336 ICTA 1988 did not apply to the facts of Dr Tuczka’s appeal. In particular, s 336 did not apply because Dr Tuczka was not a visitor to the UK; he had a home here and accepted that he was resident here in the relevant years of assessment.
35.	The expression “ordinary residence” was not defined in the Taxes Acts. The words should be given their natural and ordinary meaning.
36.	The concept required more than mere residence: the residence must have a certain quality to amount to “ordinary residence”. Mr Nawbatt referred to Lysaght and Shah.
37.	Ordinary residence was to be contrasted with occasional residence and connoted residence in a place with some degree of continuity apart from accidental or temporary absences (Levene). There was no minimum period that must elapse before an individual might be said to have adopted a place as part of the habitual or regular order of his life. The observations to the contrary in Genovese were inconsistent with Reed v Clark [1985] STC 323.
38.	For ordinary residence purposes, intention might be relevant in two ways. First, presence must be voluntary. Secondly, there must be a degree of settled purpose. This meant no more than that the purpose of living where one does has a sufficient degree of continuity to be properly described as settled; the purpose might be education, family, business. There was no requirement for any deep examination of the mind of the taxpayer (see Shah).
39.	Mr Nawbatt emphasised that an individual could be ordinarily resident in two countries at the same time, as shown in Shah.
40.	He noted that much of the evidence was directed at matters outside the years 1998-99 to 2000-01 inclusive, the latter being the period covered by the appeal. Further, much of the evidence such as Dr Tuczka’s job applications related to his intentions. Subject to the limited extent described in Shah, intention was irrelevant to the determination of ordinary residence. The key question was what the individual in question actually did during the relevant period. The phrase “for the time being” was a key phrase.
41.	Mr Nawbatt sought two further findings of fact. The first was that in or around December 1998 Sylvia, being Dr Tuczka’s long-term girl friend, entered into a fixed term training contract for a period of at least three years with PwC. The second was that (although Dr Tuczka had sought to “go back” on this) it had been July 1997 when he had started the job with Warburgs that he had had a discussion with Warburgs and then asked Sylvia to join him in London once she had finished her studies.
42.	The significance of these requested findings was to show that in 1997 Dr Tuczka was in a long-term relationship; in 1998 when Sylvia had finished her studies she did in fact join Dr Tuczka in London, to live and work in London, as they both did throughout the tax years under appeal.
43.	Mr Nawbatt reviewed the authorities in detail; his arguments on these are considered below. 
44.	Mr Nawbatt argued that by 1998-99 at the latest, Dr Tuczka was ordinarily resident in the UK; he lived in London as part of the regular order of his life adopted voluntarily and for the settled purpose of employment. The appeal should be dismissed.
Discussion and conclusions
45.	HMRC’S determination of Dr Tuczka’s ordinary residence was made under s 207 ICTA 1988, the effect of which was preserved by paragraph 12 of Schedule 7 to the Income Tax (Earning and Pensions) Act 2003 for disputes relating to the amount of income charged to tax for the year 2002-03 or any earlier tax year. In considering his status for 1998-99, 1999-2000 and 2000-01, we first review the principles to be taken into account, and then apply those principles to the facts found.
46.	Mr Gordon referred to s 336 ICTA 1988. This section does not directly deal with the question whether the individual is or is not ordinarily resident in the UK. However, Mr Gordon argued that if Dr Tuczka was shown not to have been resident, he could not have been ordinarily resident. Mr Gordon further argued that Dr Tuczka’s acceptance of residence status had been based on this statutory provision and on HMRC practice rather than on the actual or “common law” position. Mr Nawbatt contended that the section did not apply because Dr Tuczka was not a visitor to the UK. We consider these arguments below in the context of the factual position.
47.	We are grateful to Mr Nawbatt for his detailed review of the law, which we have taken into account in the following paragraphs.
48.	The expression “ordinarily resident” (and the corresponding expression “ordinary residence”) is not defined in the Taxes Acts. In Levene, Viscount Cave LC said at 507:
“The expression "ordinary residence" is found in the Income Tax Act of 1806 and occurs again and again in the later Income Tax Acts, where it is contrasted with usual or occasional or temporary residence; and I think that it connotes residence in a place with some degree of continuity and apart from accidental or temporary absences.”
49.	Similarly, Lord Warrington of Clyffe commented at 509:
“I do not attempt to give any definition of the word "resident". In my opinion it has no technical or special meaning for the purposes of the Income Tax Act. "Ordinarily resident" also seems to me to have not such technical or special meaning. In particular it is in my opinion impossible to restrict its connotation to its duration. A member of this House may well be said to be ordinarily resident in London during the Parliamentary session and in the country during the recess. If it has any definite meaning I should say it means according to the way in which a man's life is usually ordered.”
50.	In Lysaght at 528, Viscount Sumner said:
“I think the converse to "ordinarily" is "extraordinarily", and that part of the regular order of a man's life, adopted voluntarily and for settled purposes, is not "extraordinarily".”
51.	In Shah at 343, Lord Scarman said:
“Unless, therefore, it can be shown that the statutory framework or the legal context in which the words are used requires a different meaning, I unhesitatingly subscribe to the view that "ordinarily resident" refers to a man'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 for the time being, whether of short or of long duration.”
52.	There is no minimum period that must elapse before an individual may be said to have adopted a place as part of the regular order of his life. In Genovese (at paragraphs 37-40), Mr Clark questioned whether the observations in Reed v Clark could assist in a case involving whether a “foreigner” had become ordinarily resident in the UK, and concluded that there was no guidance as to the minimum period. We accept Mr Nawbatt’s argument before us that there is authority which provides assistance with this question, and review that authority in the following paragraphs.
53.	In Shah, the statutory instrument dealing with the availability of local authority education awards indicated that an authority was not under a duty to bestow an award “. . . on a person who has not been ordinarily resident throughout the three years immediately preceding the first year of the course in question . . .” As Mr Nawbatt pointed out, it must have been the underlying premise of Lord Scarman’s speech that an individual could be ordinarily resident from the time of arrival. The students had not merely established ordinary residence status by the end of their period in the UK; they had been ordinarily resident from the beginning of the three-year period specified by that subordinate legislation.
54.	An earlier case referred to by Lord Scarman in Shah was Gout v Cimitian [1922] 1 AC 105. It was held that Mr Cimitian, an “Ottoman subject” previously living in Cairo but who had gone to live in Cyprus in December 1913, was ordinarily resident (and “actually present”) in Cyprus on November 5 1914, the date of the Cyprus Annexation Order in Council. (He had then remained in Cyprus until October 1915.) The Privy Council thus decided that a period of approximately eleven months was sufficient in that context to establish ordinary residence.
55.	On the basis of Shah and Gout v Cimitian, the suggestion in Genovese at paragraphs 44-45 that a longer period of time would be necessary to establish that a pattern of residence had become “habitual” is not consistent with the authorities. In Genovese the focus was on Mr Genovese’s position for 2001-02; his status for earlier tax years since his arrival in the UK in 1998-99 was not in question. We feel that the examination of the “three-year practice” in paragraph 3.9 of HMRC’s booklet IR20 and the search for some form of linkage between that and the background law led to an over-emphasis on the question of the length of Mr Genovese’s stay in the UK. It is clear that Lord Scarman’s reference in Shah (at 342) to Lord Denning’s use of the expression “habitually and normally resident here” was intended to emphasise two features mentioned by Viscount Sumner in Lysaght, namely residence adopted voluntarily and for settled purposes; the word “habitually” did not imply a period of time, but related to the quality of the manner of residence in the UK.
56.	An individual’s intentions are of only limited relevance to the question of his or her ordinary residence status. In Shah at 344, Lord Scarman indicated that the mind of the individual was relevant in two (and only two) particular respects. The first was that the residence must be voluntarily adopted. The second was that there must be a degree of settled purpose; all that was necessary was that the purpose of living where the person in question did had a sufficient degree of continuity to be properly described as settled. The purpose, while settled, could be for a limited period. Lord Scarman gave a number of examples of common reasons for a choice of regular abode. One of these was employment. He emphasised that there was no need for any deep examination of the mind of the individual whose status was under review.
57.	As confirmed by Lewison J in Revenue and Customs Commissioners v Grace [2009] STC 213 at [3](viii), citing Shah at 342 and In re Norris cited by Lord Scarman, a person may be ordinarily resident in two countries at the same time. It follows that in relation to the position of an individual coming to the UK from elsewhere, examination of the individual’s links to another country, even if substantial, cannot assist in determining whether that individual is or is not ordinarily resident in the UK.
58.	In the context of residence (establishment of which he argued must be a precondition of establishing ordinary residence for an individual coming to the UK) Mr Gordon cited CIR v Zorab (1926) 11 TC 289 and CIR v Brown (1926) 11 TC 292. In Zorab, Rowlatt J emphasised the need to consider the nature of the individual’s connection with this country in every case; it appeared to him that Mr Zorab was a “mere traveller”. We consider below on the facts whether Dr Tuczka can be said to come within that description.
59.	In Revenue and Customs Commissioners v Grace [2009] STC 2707 at [39] and [40] the Court of Appeal emphasised, in dealing with the question(s) of the individual’s residence and ordinary residence status, that it was necessary to “take into account, weigh up and balance all relevant factors”. A recent illustration of this process is the Tribunal decision in Derek William Hankinson v Revenue and Customs Commissioners (TC 00319).
60.	For convenience, despite some repetition of our comments above, we set out Lord Scarman’s conclusions in Shah as to the meaning of the words “ordinarily resident” as summarised in Genovese at paragraph 35:
“(1) Following Levene and Lysaght, the words are to be construed in their natural and ordinary meaning as words of common usage in the English language ([1983] 1 All ER 226 at 234, [1983] 2 AC 309 at 341);
(2) The words are not to be interpreted as comparable with domicile ([1983] 1 All ER 226 at 235, [1983] 2 AC 309 at 343);
(3) They do not imply an intention to live in a place permanently or indefinitely ([1983] 1 All ER 226 at 235, [1983] 2 AC 309 at 343);
(4) Unless the statutory framework or legal context requires a different meaning, the words refer to a person's abode in a particular country which he or she has adopted voluntarily as part of the regular order of his or her life for the time being, whether of short or long duration ([1983] 1 All ER 226 at 235, [1983] 2 AC 309 at 343);
(5) The mind of the individual is relevant in two (and only two) particular respects. The residence must be voluntarily adopted, and there must be a degree of settled purpose, having sufficient continuity to be described as settled ([1983] 1 All ER 226 at 235, [1983] 2 AC 309 at 344);
(6) The purpose, while settled, may be for a limited period, and common reasons for a choice of regular abode include education, business or profession, employment, health, family, or merely love of the place ([1983] 1 All ER 226 at 235, [1983] 2 AC 309 at 344);
(7) The 'real home' test is wholly inconsistent with the natural and ordinary meaning of the words as construed in Levene and Lysaght ([1983] 1 All ER 226 at 236, [1983] 2 AC 309 at 345);
(8) The test requires objective examination of immediately past events, and not intention or expectation for the future ([1983] 1 All ER 226 at 236, [1983] 2 AC 309 at 345).
Conclusions on the facts
61.	Having regard to Mr Gordon’s contentions that Dr Tuczka may not have been resident, and that residence was a pre-requisite for ordinary residence, we consider first Dr Tuczka’s residence status for the three years in question. He had arrived in the UK at the end of June 1997 to take up employment with Warburgs in their London office. Until May 1998 he lived in rented accommodation in London. Part of his employment duties involved him in travelling abroad, but we find that his base was in London, despite the visits to Austria to keep in touch with his family and his social circle. Once he had bought the Notting Hill flat, his work pattern continued in a broadly similar way, although in later 2000 he spent more time on projects in Hong Kong and the Far East. Sylvia remained in the Notting Hill flat during Dr Tuczka’s business trips abroad.
62.	On the basis of the facts which we have found, we do not accept the contention that Dr Tuczka was a “mere traveller”; his principal base was in the UK. The facts demonstrate that it was appropriate for him to complete his returns on the footing that he was resident in the UK, and we do not accept Mr Gordon’s argument that the sole reason for Dr Tuczka doing so was s 336 ICTA 1988.
63.	Having found that Dr Tuczka was resident in the UK for the years 1998-99, 1999-2000 and 2000-01, we now consider the nature of his residence for those years to determine whether he was ordinarily resident.
64.	As indicated in Shah, the determination of ordinary residence status requires objective examination of immediately past events, and not intention or expectation for the future. A substantial part of Dr Tuczka’s evidence related to what was in his mind at particular stages, and especially his desire to return to Austria. Dealing with the two respects in which Lord Scarman stated that the mind of the individual is relevant, it is clear in relation to the first that Dr Tuczka’s residence in the UK was voluntarily adopted; he chose to come to work in the UK. As confirmed by Lord Buckmaster in Lysaght (1928) 13 TC 511 at 535, residence dictated by the exigencies of business would count as voluntary residence for this purpose.
65.	The second respect is that there must be a degree of settled purpose. Dr Tuczka completed his form P86 just over a year after his arrival, indicating that he intended to stay in the UK for a period of two and a half years. Counting from the date of his arrival at the end of June 1997, that period would have expired at the end of December 1999. At the time when he completed the P86, the terms of his employment were as set out in his employment letter from SBC Warburg dated 15 April 1997; this provided that he was eligible to participate in “the Bank’s discretionary non-pensionable incentive scheme”. Any incentive payment made was always subject to his “continued employment with the Bank at the date of payment, and either you or the Bank not having served notice of termination of your employment at the time”.
66.	Dr Tuczka’s evidence was that any bonus under the “bonus round” for 2000 would not have been secure until about 25 March 2000, in advance of which date it would not have been prudent for him to have given notice. Our conclusion on the facts is therefore that his decision to remain in the UK for the purposes of employment must have extended at least to a point approximately three months beyond the two and a half years which he had stated to be his intended length of stay in the UK.
67.	Although he expressed the wish to leave before the third anniversary of his arrival (which would have meant departure before the end of June 2000), he acknowledged in his evidence that there was “a strong impetus, both professional and personal, to stay put for a few months more chasing the next big deal”. He emphasised that his personal life was pulling him strongly in the opposite direction.
68.	Although Dr Tuczka laid great stress on the unexpectedly volatile background against which it had become virtually impossible for him to adhere to his original plans to depart from the UK well before the third anniversary of his arrival, it is clear that he viewed his employment as the principal “driver” of his decision-making. What he actually decided to do was to remain based in the UK, to continue his employment with Warburgs. In evidence, he described his presence in the UK during 2000 as “in essence . . . transient, marked by uncertainty, fragmented and punctuated by frequent lengthy absences abroad, and characterised by conflicting priorities, both personal and professional”. However, his base remained in the UK throughout the rest of 2000-01, and he did not leave Warburgs until May 2002.
69.	Dr Tuczka’s state of mind may not have been settled. However, what requires examination in the context of ordinary residence is not the individual’s state of mind, but whether there is a degree of settled purpose, having sufficient continuity to be described as settled. In Shah Lord Scarman indicated at 349 (in the context of the specific provisions relating to local education awards) that it was not necessary to make any attempt to discover the individual’s long term future intentions or expectations; the relevant period was not the future, but one which had largely or wholly elapsed. We conclude from this that the appropriate course is to look back over the period of the individual’s stay in the UK and ask whether the purpose appears to have been settled, without going into a detailed exercise of examining the individual’s state of mind at various stages during that stay. As Lord Scarman said in Shah at 344:
“There will seldom be any difficulty in determining whether residence is voluntary or for a settled purpose: nor will inquiry into such questions call for any deep examination of the mind of the “propositus”.”
70.	To put the question in the form posed by Lord Scarman earlier on the same page: did the purpose of Dr Tuczka living where he did (ie in the UK) have a sufficient degree of continuity to be described as settled?
71.	Our answer to that question is it did. The question then becomes: at what point did the purpose become settled? There has been no attempt by HMRC to suggest that continuity of settled purpose could be traced back to 1997-98, the year of Dr Tuczka’s arrival in the UK. The first year for which HMRC have determined that Dr Tuczka was ordinarily resident is 1998-99. By the beginning of that year, he had been in the UK for just over nine months into what he subsequently indicated in his form P86 was expected to be a two and a half year stay (but which we have determined must have been intended to last for at least 33 months).
72.	Mr Nawbatt asked for the two findings of fact referred to at paragraph 41 above. In relation to the first, we find that at some point in 1998 (probably December), after completing an initial temporary training contract begun in July 1998, Sylvia entered into a fixed term training contract with PwC. This continued until some point shortly before May 2002. On the second, we find that in July 1997 Dr Tuczka had had a discussion with Warburgs shortly after starting his job with them and had then asked Sylvia to join him in London once she had finished her studies. We are satisfied that Dr Tuczka expected from a very early stage that Sylvia would be joining him in London, as his evidence was that he decided not to decorate the E14 flat or to move many of his personal possessions into it. 
73.	We consider that the purpose became settled during 1998-99. Dr Tuczka and Sylvia set up home in London in the spring of 1998, and their employment commitments kept them in London. In arriving at this conclusion, we take account of the potentially precarious nature of Dr Tuczka’s employment; his contract contained a relatively short notice period of four weeks, and we are aware that sudden decisions without notice to terminate employment contracts in banking have always been a hazard for bank employees. However, Dr Tuczka’s purpose was to continue his employment while it lasted. As Mr Nawbatt emphasised, the words “ordinarily resident” were stated by Lord Scarman in Shah at 343 to refer to “a person’s abode in a particular country which he or she has adopted voluntarily as part of the regular order of his life for the time being, whether of short or long duration” (emphasis added).
74.	One factor in considering this question is Dr Tuczka’s decision to purchase the Notting Hill flat. In our view this is not determinative of the question; it is an added factor demonstrating that his purpose in living in London for the time being was settled. Even without the purchase of the flat, we consider that the evidence shows Dr Tuczka to have become ordinarily resident during 1998-99. He chose to remain in London for a settled purpose, namely his employment, and adopted a pattern of living which in fact continued until 2002 (and, with certain changes, subsequently). We have accepted Mr Nawbatt’s argument that there is no minimum period required in order to establish ordinary residence, and that this can in some circumstances be demonstrated after a comparatively short time has elapsed. Although Dr Tuczka had various intentions and expectations for the future, circumstances prevented these from being fulfilled and he continued with the existing pattern of living for the remainder of the three years under appeal. There was no change in the pattern over that period, so that (applying examination of immediately past events, as indicated in Shah) its commencement has to be taken back to the earliest fiscal year in which that pattern can be shown.
75.	Our conclusion is therefore that Dr Tuczka became ordinarily resident in the UK during 1998-99, and remained ordinarily resident for the subsequent years 1999-2000 and 2000-01. As previous and subsequent years are not under appeal, we express no view as to Dr Tuczka’s status for any of such years.
76.	Mr Gordon made detailed comparisons of Dr Tuczka’s circumstances with those of Mr Genovese. Although there were various similarities, the principal distinction between Dr Tuczka’s case and Genovese is that Mr Genovese’s  ordinary residence status was only in question for the year 2001-02, and no determination of that status had been made for any of the tax years from 1998-99 to 2000-01. Further, we have dealt with the respects in which Mr Nawbatt contended that the approach taken by Mr Clark in that case had failed to take account of existing authority, and have accepted those arguments. As decisions on questions of ordinary residence are arrived at on issues of fact (as acknowledged, for example, by Viscount Sumner in Levene at 502), we do not consider that comparing the facts of different cases on such questions is helpful to the process of resolving the issue of a particular individual’s ordinary residence status.
77.	This appeal was argued on the basis that HMRC’s booklet IR20 had no application, and that it was outside the Tribunal’s jurisdiction. (Mr Nawbatt indicated that in his view it would have assisted HMRC’s case, but stated that it was not relevant to the issues in this appeal.) In arriving at our decision, we have not been influenced by IR20; our view is based on the law rather than HMRC practice. It is clear from the correspondence between Dr Tuczka’s advisers and HMRC that the acquisition of the Notting Hill flat was thought by the advisers to have had an undue influence on HMRC’s conclusion as to his status. In our view, it did not; the approach taken by HMRC can be shown to have been based on the other factors which have led us to the view that the determination as to Dr Tuczka’s ordinary residence status for the years in question is to be upheld. Acquisition of a property would not necessarily prevent an individual from establishing that he or she was not ordinarily resident, provided that the property was sold within the period specified in IR20; in other words, an individual could buy instead of renting, based on the same commercial approach as expressed by Dr Tuczka, and still not prejudice the ordinary residence status, as long as the property was held for a limited period.
Summary of conclusions
78.	We uphold the determination that Dr Tuczka was ordinarily resident for the years 1998-99, 1999-2000 and 2000-01, and dismiss his appeal.
79.	Dr Tuczka 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 CLARK
TRIBUNAL JUDGE
RELEASE DATE: 1 February 2010