Spc00639

INCOME TAX – s 19 TA – Was the taxpayer UK resident at the relevant time?  Yes, Commonwealth Citizen abroad for an occasional purpose as not shown to be working full time abroad, no distinct break in pattern of life and in UK on 6 April 1998 – Resolution authorising payment not shown to relate to future – appeal dismissed

THE SPECIAL COMMISSIONERS				 	       

	LEE BARRETT	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		Special Commissioner: 	ADRIAN SHIPWRIGHT

Sitting in public in London on 22 and 23 May 2007

Richard Bramwell QC and Michael Collins, Counsel, instructed by Deloitte, for the Appellant

Ingrid Simler QC instructed by the General Counsel and Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Introduction
1.	This is an appeal against an amendment to Lee Robert Barrett’s (“Mr Barrett”) tax return for the year ended 5 April 1999. This was notified to Mr Barrett in a letter dated 29 March 2004. The amendment included a bonus of £2,800,000 and interest received of £161,219 as taxable income for the year of assessment in question.
The Issue
2.	The parties agree that there two issues in this case. These are:
(1)	Whether Mr Barrett was resident and/or ordinarily resident in the UK in the 1998/99 tax year; and
(2)	To which year or years emoluments of £2.8 million received by the Appellant should be attributed for the purposes of section 19(1) TA and, if to more than one year, how the emoluments should be apportioned between those tax years?
The Law
3.	The Law in so far as is relevant to this appeal is found in section 19(1) TA which reads as follows:
19 Schedule E
(1) The Schedule referred to as Schedule E is as follows—
SCHEDULE E
1 Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which fall under one or more than one of the following Cases—

Case I:	any emoluments for any year of assessment in which the person holding the office or employment is resident and ordinarily resident in the United Kingdom, subject however to section 192 if the emoluments are foreign emoluments (within the meaning of that section)...;	 	
Case II:	Any emoluments, in respect of duties performed in the United Kingdom, for any year of assessment in which the person holding the office or employment is not resident (or, if resident, not ordinarily resident) in the United Kingdom, subject however to section 192 if the emoluments are foreign emoluments (within the meaning of that section);	 	
Case III:	any emoluments for any year of assessment in which the person holding the office or employment is resident in the United Kingdom (whether or not ordinarily resident there) so far as the emoluments are received in the United Kingdom;	 	
and tax shall not be chargeable in respect of emoluments of an office or employment under any other paragraph of this Schedule. …
4A Where (apart from this paragraph) emoluments from an office or employment would be for a year of assessment in which a person does not hold the office or employment, the following rules shall apply for the purposes of the Cases set out in paragraph 1 above—
(a) if in the year concerned the office or employment has never been held, the emoluments shall be treated as emoluments for the first year of assessment in which the office or employment is held;
(b) if in the year concerned the office or employment is no longer held, the emoluments shall be treated as emoluments for the last year of assessment in which the office or employment was held…
4.	Sections 334 and 336 TA are relevant to residence and ordinary residence. Insofar as relevant these provide as follows
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.
336 Temporary residents in the United Kingdom
(1) A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, if— 
(a) he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and
(b) he has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment,
but if any such person resides in the United Kingdom for such a period he shall be so chargeable for that year.
(2) For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has.
(3) The question whether—
(a) a person falls within subsection (1)(a) above, or
(b) for the purposes of subsection (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there,
shall be decided without regard to any living accommodation available in the United Kingdom for his use.”
The Authorities
5.	The parties provided me with copies of the following authorities:
Levene (1928) 13 TC 486
CIR v Combe (1932) 17 TC 405
Cooper v Cadwalader (1904) 5 TC 101
Lysaght v CIR (1928) 13 TC 511
Barnet London Borough Council v Shah (1983) 2 AC 309
IRC v Zorab (1926) 11 TC 289
Re Young (1875) 1 TC 57
Re Mackenzie (1941) CH 69
Bray and Best (1989) 61 TC 705
UCL v Newman [1986] CA Trasipt
Shepherd v HMRCC [2006] STC 1821
Saines-Cooper v HMRCC [2007] STC (SCD) 23

6.	An Extract from IR 20 paragraphs 2.1 to 2.10 (inclusive) was also provided. It was accepted by both parties that this was not binding on me but might be informative.
The Evidence
7.	An agreed bundle of documents was produced. No objection was made to any of the documents and they were all admitted in evidence.
8.	A Statement of Agreed Facts was produced.  This read as follows:
(1)	“Mr Barrett was to all material times a director of Centurion Management (Overseas) Limited (“CMOS”). CMOS provided management and promotional services to artistes in the music and entertainment industry both inside and outside the UK.  Mr Barrett was the chief executive of CMOS.  Mr Barrett’s brother was also a director of CMOS and was company secretary.
(2)	In the 1980s CMOS represented a successful music artiste called Sade.  In 1988 CMOS commenced proceedings against Angel Holding Ltd & Others (representing Sade) in respect of unpaid management fees.  On 18 December 1997 the case settled with Angel Holding Ltd making a payment of £3,357.500 to CMOS.
(3)	During the 1998/1999 tax year, Mr Barrett’s Partner, Ms Jacqueline Higgin, and his sons, who were born in February 1995 and September 1997, resided in the UK in a house belonging to Mr Barrett.
(4)	It is agreed that Mr Barrett was in the UK on the following days during the 1998-1999 tax year:
		11 and 18 April 1998,
		3, 10, 16 and 17 May 1998,
		9 to 17 July 1998,
		16 and 31 October 1998,
		3, 4, 14 and 28 November 1998.
This is without prejudice to any contentions the Repondents may wish to make that Mr Barrett was also in the UK on other occasions.” 		 
9.	I heard oral evidence from:
(1)	Mr Barrett, the Appellant; and
(2)	Charles Bradbrook, a partner in Deloitte & Touche LLP who was Mr Barrett’s adviser at the time.

Witness statements were provided for each of them and they were cross examined.
Findings of Fact
General
10.	From the evidence I make the following findings of facts.
11.	In particular I find the matters set out in the Statement of Agreed Facts (see 7 above) as facts in this case.
 The Appellant and his employment
12.	The Appellant was born in Canada in 1957 but is a ‘British Subject’ and so a Commonwealth Citizen. He was resident and ordinarily in the UK for many years before 1998-1999. He came to the UK when he was two years old and was at school and University in the UK.
13.	He is the director and major shareholder of Centurion Management (Overseas) Limited (“CMO”), a close company. CMO was formerly called Factorhinge Limited.
14.	Mr Barrett entered into a contract of employment with CMO “with effect from 5th day of March 1986” as a manager to popular music groups in all parts of the World outside the United Kingdom”. This was “… for a period of five years and thereafter unless determined by either party giving to the other not less than three months’ notice in writing.” There was no evidence that the contract has been determined. I find that it had not been terminated and was still in force. Mr Barrett gave evidence that he had worked all over the World including in Spain, France, the USA and Japan for CMO.
15.	Clause 5.1 of the contract of employment provided for a salary which was to be payable in equal monthly instalments and for a bonus. The salary and bonus were to be recoupable against the commission payable to Mr Barrett provided for in clause 5.2 of the contract of employment.
16.	Provision was also made in clause 9 of the contract of employment for suspension of salary. This read as follows.
“9.1	The Company shall have the right (provided the Company shall have given prior written notice to the Employee) to suspend payment of the salary hereunder:
(a)	if the Company is unable for a continuous period of three (3) months to make use of the Employee’s services hereunder by reason of any cause beyond the control of the Company other than a cause beyond the control of the Company other than a cause specifically hereinafter referred to;
(b)	if the Employee shall have been unable to devote such time and attention to the employment hereunder as the Company shall reasonably require for a continuous period exceeding three (3) months or an aggregate of ninety (90) days in any consecutive period of twelve (12) months by reason of mental or physical illness or incapacity;
9.2	If the Company has properly suspended payments hereunder it shall be entitled to continue such suspension only during the period of the contingency giving rise to the suspension and shall thereafter forthwith resume payment.”  
The Resolution
17.	A Written Resolution was included in the bundle. It read as follows:
“CENTURION MANAGEMENT (OVERSEAS) LIMITED
Hill House
1 Little New Street
London
EC4A 3TR

WRITTEN RESOLUTION OF THE DIRECTORS

It was resolved that Centurion Management (Overseas) Limited will award a £2,800,000 Bonus to Lee Barrett in respect of services to the Company for the year ended 31st August 1998 to be paid with the April Salary. 

Signed:

  [Signed]
……………………………
L R Barrett

  [Signed]
……………………………
L G Barrett 

Dated: 29th April 1998”.
18.	Mr Barrett gave evidence that the payment was agreed before he left the UK. He thought there had been a discussion in February or March 1998 on the phone.  It was said the Resolution dated 29 April 1998 did not refer to any earlier matters as there did not seem to be any point in doing so. It was a document to formalise a payment made in April 1998. Mr Barrett agreed that it was not signed on 29 April 1998. 
19.	Mr Bradbrook gave evidence that the Resolution came into existence sometime after late 1998 when the auditors noticed the payment of £2.8m and wanted to treat it as a director’s loan. Mr Bradbrook told the auditors it was not a loan but a bonus payment of salary. He drafted the minute and said he used conventional wording. The August 1998 date was used as that was the year end. He said he had not just made it up but created it to reflect what had happened. However, it seems that the wording actually used was produced by the auditors probably for accounts drawn up in May 1999.
20.	No evidence as opposed to assertion was produced that the payment was for the future rather than the past. The onus is the Appellant to show this and he has not done so.
21.	Such evidence as there was as to the Resolution is that it was created later to formalise the payment that had been made. There is no contemporary evidence before me as to why the payment was made.  However, because of my view on other matters I do not need to find why the payment was made. Nevertheless I record that if I needed to I would find that it was a payment of back salary that was made and documents to justify other arguments for accounts purposes were put in place.
Tickets etc
22.	Mr Barrett did not have copies of the aeroplane tickets for his trip when he left the UK on what was claimed was a ‘distinct break’ in the pattern of his life. He did not have any boarding pass or similar documents or other evidence despite having paid for high powered advice on leaving the UK for tax reasons. I find this surprising to say the least. I would have expected him to keep any evidence to mark this change and support his case if challenged. It could have helped to have evidence as to when Mr Barrett left when considering the Bank Statements discussed below.
The Bank Statements
23.	The bundle contained bank statements. It was noticed during the course of the hearing that there were entries in them that suggested that withdrawals had been made from a cash machine and a switch card used at Gatwick on 6 and 7 April 1998. It was noted that 4 April 1998 was a Saturday, 5 April a Sunday and 6 April a Monday.
24.	The entries included the following.
		06/04/98		8RHS9XY6	   BP ODEON S/SERVE		  BARNET
		06/04/98		09B6G40X	   SRI SIAM			  LONDON
		06/04/98		IN3GFWIK	   NAT WEST CASH MACHINE	  SAINS LADBRK
07/04/98		90RVV5QB	   SINSSBURY’S S/MKT		  LADBROKE GROV
25.	Mr Barrett accepted that the Maida Hill cash machine was ‘at the top of the road’ where his house was.
26.	I was asked for evidence as to how and when a cash withdrawal and a Switch transaction would be recorded on Statements. Were they immediate recordings or could there have been a delay? I gave the parties 14 days to provide such information as they thought fit in writing on this issue. Both parties provided me with responses form the financial institutions.
27.	HMRC summarised their position as follows (having consulted APACS and the bank):
“You will note that there is a slight conflict between the information received.  However, both sets of advice support the entries on the Midland bank statements on pages 80 and 91 of Tab 8 of Bundle 2 which show the statement date and the date that the money was actually withdrawn.  Unfortunately we are not given the same level of detail on the credit card statements.”
28.	HSBC Private Bank said to Deloittes
“I can confirm that the dates of these transactions appearing on the statement would in each case have been after the date of the cash withdrawal.  We are unable to be specific…”   
29.	The onus is on the Appellant to show that the date on the Statements is not the date of withdrawal or use. I find that on the balance of probabilities the Appellant has not shown that the dates on the statements are not the dates of withdrawal or use. 
30.	On that basis Mr Barrett did not leave the UK till 8 April 1998 at the earliest. There is an entry though dated 9 April 1998 for the Groucho Club, London W1V so it may have been even later.
31.	There is also another puzzling entry on the Bank Statements which records a cash withdrawal at Maida Hill on 14 April 1998 when Mr Barrett said he was not in the UK. Although Mr Barrett claimed a day trip only for 18 April 1998 for a football match there is a cash withdrawal at Maida Hill recorded for 20 April 1998 (a Monday) and for ‘3C NCP Limited UPT Heathrow Airp’. This does not help show that he had left the UK and/or that there was a ‘distinct break’ in the pattern of Mr Barrett’s life.
The Diary 
32.	On the first day of the hearing Mr Barrett maintained that he kept notes but did not keep a diary. However, on the morning of the second day of the hearing a small pocket size book labelled ‘1998’ on the front and Ryman on the back was produced. It was what I would call a pocket diary. However, it may be the book in which Mr Barrett kept his notes. It is curious that it had not come to light before.
33.	The Diary did not seem to be an appointment diary or a collection of thoughts and musing as well as notable events a la Pepys. It contained short entries mainly in the past tense. Thus for 5 April 1998 the entry is ‘Flew to Madrid’. There are no entries for football matches and no entries for 14 April 1998 or 18, 19 and 20 April 1998. It was an unusual document which was not of much assistance to me.
34.	The Diary was not what I would have expected of a person working full time. There were no entries of meetings, appointments, deadlines or other real business events. 
Spain and France
35.	Mr Barrett continued to pay the UK outgoings, home insurance, council tax, electricity, gas etc. He did not register with a doctor or dentist abroad. He left his car here and did not tell the DVLA he was going abroad nor did he change the postal collection. He did not set up a bank account in Spain.  He did not have a continental credit card but told me he used his UK cards.
36.	His partner and the children remained in the family home. They did not move with him. Mr Barrett visited them when in the UK. Mr Barrett returned to the UK to watch football matches.
37.	There was no evidence that Mr Barrett was working full time when in France or Spain. He was apparently looking for a Latino act to manage but there was systematic business plan to find such an act. I find as a fact that he was not working full time.
38.	There was no evidence of a distinct break in the pattern of Mr Barrett’s life in the way that there was in the Dave Clark case. Nothing seemed to change. I find there was no distinct break in Mr Barrett’s life.	
The Submissions of the Parties
The Appellant Submissions in outline
39.	In essence, Mr Bramwell for the Appellant submitted that Mr Barrett was not resident or ordinarily resident in the UK at the relevant time and so was outside the charge to UK income tax. Mr Bramwell very properly accepted that Mr Barrett had been UK resident and ordinarily resident before 1998-99 and that he was a Commonwealth Citizen.
40.	In more detail it was contended:
(a)	This was a ‘distinct break’ case as in the Dave Clark case. Mr Bramwell did not seek to argue full time employment or business abroad despite Mr Barrett seeming to claim that there was full time occupation in his evidence.
(b)	Mr Barrett was out of the UK for more than 12 months and more than a full tax year.
(c)	Mr Barrett’s intention when he left is what is relevant (see eg Nicholls J in the Dave Clark case at 555B-E). Mr Barrett’s intention when he left to be out of the UK for more than 12 months and he was. He resolved to live in Spain and France for a whole tax year and he carried his intention through. Accordingly, on general principles he was not resident in the UK. The question arises does anything change this to which the answer is a resounding “No”.
(d)	Sections 334-336 do not change the position as Mr Barrett was not UK resident on general principles and not abroad for a temporary purpose only.
(e)	That he did not in fact settle in a single country for a whole year is immaterial (see UCL v Newman CA Transcript).
(f)	The Resolution does not mean what it seems to as the real intention was that it should be a bonus for future work to be done. Therefore it could not be attributable to any earlier year as it was for work to be done in the future.
(g)	Mr Bramwell, again very properly, accepted that what was done was done to reduce Mr Barrett’s tax bill but he argued so what? As Nicholls J said in the Dave Clark case at 556B-C “… residence abroad for a carefully chosen limited period of work there (if that is what the facts establish) is no less residence abroad for that period because the major reason for it was the avoidance of tax…”
(h)	Accordingly, as Mr Barrett was not resident in the UK at the relevant times there could be no liability to UK income tax. 
HMRC’s Submissions
41.	In essence, Ms Simler QC for HMRC submitted that the payments in question were taxable as:
(1) Mr Barrett was resident and ordinarily resident in the UK in the relevant year of assessment whether 1997-8 or 1998-1999
	(2) The bonus related to the years of assessment prior to 5 April 1998.
42.	In more detail it was contended:
(a)	Mr Barrett was not shown to have been out of the UK on 6 April 1998 and so cannot be treated as non-resident for 1998-9.
(b)	Even if Mr Barrett were non-resident (which is not admitted) for 1998-9 he went abroad for an occasional or temporary purpose ie to avoid tax, not full time employment or business. He had no full time employment or business during that period.
(c)	There was no distinct change in his pattern of life. Nothing changed. His contract continued. He did not establish an “HQ” abroad or a permanent home abroad. His “centre of vital interests” remained in the UK. The position was the same as if he had been on a long holiday abroad. Mr Barrett had none of the attributes of a non-resident.
(d)	Even if Mr Barrett were non-resident (which is not admitted) for 1998-9 on general principles sections 334-336 make him taxable as if he were UK resident.
(e)	The Resolution means what it says and the bonus relates to the earlier period.
(f)	Accordingly Mr Barrett is taxable on the emoluments:
i.	As he was resident and ordinarily resident in the UK on general principles; or
ii.	If not under sections 334-336 TA.
(g)	Accordingly, the payment was liable to UK tax.
Discussion
Introduction
43.	The arguments of the Parties raise, in particular, five questions that need to be answered to reach a decision in this appeal. These are:
(a)	Was Mr Barrett in the UK on 6 April 1998?
(b)	Was there a “Distinct Break” in the pattern of Mr Barrett’s life?
(c)	What was the effect of the contract of employment?
(d)	What was the effect of the Resolution?
(e)	Does the payment relate to a period when Mr Barrett was not within the charge to UK Tax?

44.	In considering these questions I accept Mr Bramwell’s argument that going abroad to reduce the tax bill does not of itself prevent residence abroad being residence abroad if the facts establish residence abroad. However, all the circumstances have to be considered.
Was Mr Barrett in the UK on 6 April 1998?
45.	I have found that it has not been shown on the balance of probabilities that Mr Barrett was not in the UK on 6 April 1998. I proceed on the basis that he was in the UK then.
Was there a “Distinct Break” in the pattern of Mr Barrett’s life?
46.	Mr Bramwell QC cogently drew my attention to what Nicholls J said in the Dave Clark case at 556B-C “… residence abroad for a carefully chosen limited period of work there (if that is what the facts establish) is no less residence abroad for that period because the major reason for it was the avoidance of tax…”
47.	Accordingly, I have to consider does the evidence here show that there was residence abroad for a carefully chosen limited period of work? For the reasons set out below I consider it does not and I so find.
48.	I consider that this is not a “distinct break” case. I have considered all the circumstances in reaching this conclusion. However, I have been particularly influenced by the following factors though none of them is determinative and must be viewed in the context of all the circumstances and evidence.
a.	Mr Barrett continued to be employed by CMO under the contract of employment. I do not consider (in agreement with Mr Bramwell QC) full time employment or business abroad was involved here. There was no change here.
b.	Mr Barrett seems to have been doing much what he was doing before. He was looking for an act or acts to manage through CMO, his employer. His work did not change. He had worked abroad before for CMO as he said in evidence. There was no change here.

c.	Mr Barrett did not establish a permanent home abroad. There was no change here.
d.	He did not establish an “HQ” abroad. There was no change here.
e.	His partner and family continued to be in the UK in the family home where they still live. His family ties were here.
f.	He paid the UK bills from his UK accounts. He did not make special financial arrangement for his time abroad (such as bank account, credit card, medical insurance etc). He maintained and used his UK bank accounts and credit cards.
g.	No special arrangements seem to have been made as to his car, driving licence, residence permits, foreign identity card or similar matters.
h.	His “centre of vital interests” remained in the UK. There was no evidence before me to show that this had changed.
i.	I found the lack of certainty as to when he went abroad surprising if it was a distinct break in the pattern of his life. I also find it surprising that there was no ticket or boarding pass stub or similar evidence if this was so different from what had gone on before so as to be a distinct break in the pattern of his life. If he went abroad for tax reasons to escape the UK tax net having taken advice from well known advisers one would have expected him to have been advised of the importance of objective evidence to show this. 
j.	The “diary” does not evidence a distinct break. It is also surprising that it had not been available before the second day of the hearing. I draw no conclusion one way or the other from that though.
k.	Mr Barrett showed none of the attributes that one would expect of a non-resident or of a person in the pattern of whose life there had been a distinct break.

49.	Mr Barrett was a Commonwealth Citizen who had been resident and ordinarily in the UK in the preceding years. I have found that he went abroad for an occasional purpose only such that section 334 TA applies.
50.	Much discussion took place as to the time Mr Barrett spent in the UK and how accurate the information supplied was. For the sake of completeness I record my findings on this. However, I would point out that it was not the number of days in or out of the UK that were decisive in this case in my view. The findings are as follows.

Date	Claim	Finding	Days in UK	
Sat 4 to Tues 7 April 1998	Claims to have left 5 April though return says 4 April	Cash machine and Switch card charged to 6 and 7 April at UK sites.  In UK till 7 April	In UK till at least 6 April
2	
Sat 11 April	Day trip	In UK 	1	
14 April 		Cash machine used in Maida Hill in UK	1	
18 April	Day trip	Cash machine in Maida Hill used.  Charged to 20 April 1998	Possibly 3	
3 May	Day trip claimed	Cash machine in Maida Hill used.  Charged to 5 May 1998	Possibly 3 nights	
10 and 11 May	Admits being in UK on 10 May.  In UK 10 and 11 May.  	Switch card used in UK.  Charged to 11 May 1998	2	
15 to 18 May		Stayed in UK for 4 nights.
Switch card used in UK and Automatic Teller Machine	4	
20 to 21 May 1998		In UK for football match and admitted staying overnight.  	2
	
		Mango Room restaurant no evidence that he left.  Seems he was here till 26 May when he flew to Gibraltar	7	
3 June 1998		Used Gatwick Express	1	
8-17 July		In UK from 8 July when he arrived.  Attended The Groucho Club, a restaurant and went shopping in Covent Garden.
He used Automatic Teller Machine at Gatwick on 17 July	9	
16-19 October 1998		In UK.  Cash machine Maida Hill charged to 19 October 1998.  He went to Greece on 19th	4	
4 to 13 November1998		In UK.  Cash machine used on 5 November	Possibly 8	
From 28 November 1998	Not in UK	Much time spent in various ski resorts.  This does not suggest full time employment or business.		
7 April 1999		Returned to UK		

What was the effect of the contract of employment?
51.	Neither party to the contract had terminated the contract of employment in accordance with its terms nor had it been repudiated. The contract required three months’ written notice to terminate it. I was shown no such notice.
52.	The contact of employment provided for a substantial salary to be paid in equal monthly instalments and for a bonus. In Clause 9 the contact of employment gave power for CMO to suspend the payment of the salary if written notice had been given. However, the suspension was only to continue during the period of the contingency giving rise to the suspension. After which it “shall forthwith resume payment”. There was no evidence of written notice having been given.
What was the effect of the Resolution?
53.	On its literal wording the Resolution is authority for a bonus for the year ended 31 August 1998. On the basis of my findings as to residence I do not need to decide what was the effect of the Resolution other than on this basis.
54.	Both parties invited me to consider that the Resolution meant something other than it said. Mr Bramwell QC, in effect, invited me to treat the Resolution as not meaning what it seems to mean as the real intention was that it was a bonus for future work not for the period ending August 1998. Despite Mr Bramwell QC’s persuasive skills and attractive arguments I heard no objective evidence to support this interpretation. I consider that strong objective evidence would be needed to stand up such a construction.
55.	Ms Simler QC, in effect, invited me to treat it as meaning what it says and if not as relating to the earlier period.
56.	As noted above I do not need to decide this as Mr Barrett was resident in both periods.  However, if I had to I would look first to the time of payment. It was made in the first half of 1998 before the Resolution was signed. Mr Barrett gave evidence that the payment was agreed before he left the UK and agreed the Resolution was not signed on 29 April 1998. At the time of payment the contract of employment was still in force. It was most likely that the payment was a payment under the contract of employment for earlier periods if it was not for the period ended 31 August 1998 as the Resolution said. Either way it was made for period(s) and received in a period when Mr Barrett was within the charge to UK income tax.
Does the payment relate to a period when Mr Barrett was not within the charge to UK Tax?
57.	The payment was made in the first half of 1998. I have found that Mr Barrett was resident and ordinarily resident in both 1997-98 and 1998-98. Accordingly, even if the payment was made after 5 April 1998 then Mr Barrett was within the charge to UK tax in respect of the payment. This would be the case whether one takes the Resolution literally assuming it to have been properly passed or whether it is to be ignored either as a payment of suspended salary or for future work.
Conclusion
58.	I have found that:
a.	Mr Barrett has not been shown to be outside the UK on 6 April 1998;
b.	There was no “Distinct Break” in the pattern of Mr Barrett’s life;
c.	The contract of employment with CMO continued;
d.	The effect of the Resolution was not shown to relate to future work. It related to past work.
e.	The payment was made when Mr Barrett was UK resident.

59.	Consequently, the payment relates to a period when Mr Barrett was within the charge to UK Tax and is taxable as Mr Barrett was resident and ordinarily resident in the UK in the 1998/99 tax year and the periods on either side which is the year in which he received the payment and to which it should be attributed for the purposes of section 19(1) TA. Both questions in paragraph 2 above (The Issue) are thus answered in HMRC’s favour.
60.	Accordingly, the appeal is dismissed.

ADRIAN SHIPWRIGHT
           SPECIAL COMMISSIONER
         RELEASE DATE: 27 September 2007

SC/3318/2005