Grace v HM Revenue and Customs

The issue in these proceedings is whether the appellant, Mr Grace, was resident in the UK for tax purposes during the tax years from 1997/8 to 2002/3. Whether he was ordinarily resident for those purposes is also in issue, but on the facts of this case it is common ground that if, and only if, he was resident, then he was ordinarily resident, so it is not necessary to consider that question separately. Dr Brice, the Special Commissioner, held that he was not resident; on appeal Lewison J held that he was resident. With permission granted by Jacob LJ Mr Grace appeals to this court, contending that the Special Commissioner was right, or alternatively that if there was any error of law in her ruling, the question should be remitted for a fresh decision.

The appellant is an airline pilot. He works for British Airways (BA), flying long-haul flights out of Gatwick or Heathrow. He has to be in England for some days before any outward flight and, in practice, sometimes between inward and outward flights. He started work as a long haul pilot in 1987 for British Caledonian, later taken over by BA. From 1986 to 1997 he was resident in the UK, latterly owning and living in a house in Horley. In August 1997 he took a rented apartment in Cape Town, and later bought a house there. He contends that, since then, he has not been resident in the UK, regarding his house in Cape Town as his home, spending as much time there as he can, consistently with performing his duties as a BA pilot, and intending to spend his retirement there in due course. HMRC argue that his continued presence in the UK, as the base from which he does his work, shows that he is still resident here, just as he was before 1997.

The issue of residence in the UK only arises in a case in which the person in question spends time outside the UK. The circumstances in which he or she does so, and the pattern of, and reasons for, time being spent in the UK and elsewhere may be infinitely various. Decided cases illustrate a great variety of examples, and the result of one case cannot normally be used as a guide to how another should be decided, even if the two have some factors in common.

The decision as to residence or otherwise is for the Special Commissioners, or now the First-Tier Tribunal (Tax Chamber). It depends primarily on issues of fact. As is well established, an appeal from such a decision, which must be on a point of law, can only succeed if one or other of two things can be shown: (1) that the decision is one which “no person acting judicially and properly instructed as to the relevant law could have come”; or (2) that the reasoning for the decision contains something which is on its face bad law and which bears on the determination: see Edwards v Bairstow [1956] AC 14, at 36.

There is no statutory definition of residence for tax purposes. There are some statutory provisions with marginal relevance, to which I will refer, but it is case law that affords guidance as to the content and meaning of the relevant phrases, such as that in Schedule E in section 19 of the Income and Corporation Taxes Act 1988: “any year of assessment in which the person holding the office or employment is resident and ordinarily resident in the United Kingdom”. Lewison J summarised a number of relevant factors in paragraph 3 of his judgment, and at the end of his judgment he referred back to, and described as impeccable, another list provided by Dr Brice in her decision in an earlier case about another airline pilot, Shepherd v HMRC (2005) SPC 00484, from which, as it happened, Lewison J had heard and dismissed an appeal: [2006] EWHC 1512 Ch.

Lewison J’s summary is 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 Commissioners of Inland Revenue (1928) 13 TC 486, 505. This is the definition taken from the Oxford English Dictionary in 1928, and is still the definition in the current on-line 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 (1998) 70 TC 478, 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: Commissioners of Inland Revenue v Zorab (1926) 11 TC 289, 291;

(iv)

Residence in a place connotes some degree of permanence, some degree of continuity or some expectation of continuity: Fox v Stirk [1970] 2 QB 463, 477; Goodwin v Curtis (1998) 70 TC 478, 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 Commissioners of Inland Revenue (1928) 13 TC 511, 529;

(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 Commissioners of Inland Revenue (1928) 13 TC 486, 505;

(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: R v Barnet LBC ex p Shah [1983] 2 AC 309, 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 (1888) 4 TLR 452; R v Barnet LBC ex p Shah [1983] 2 AC 309, 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”: R v Barnet LBC ex p Shah [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: R v Barnet LBC ex p Shah [1983] 2 AC 309, 344;

(xi)

Although residence must be voluntarily adopted, a residence dictated by the exigencies of business will count as voluntary residence: Lysaght v Commissioners of Inland Revenue (1928) 13 TC 511, 535;

(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: R v Barnet LBC ex p Shah [1983] 2 AC 309, 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: Re Combe (1932) 17 TC 405, 411.”

This has the incidental advantage of identifying almost all the decided cases to which I need to refer. Those not already mentioned to which I will refer are Re Young (1875) 1 TC 57, Cooper v Cadwalader (1904) 5 TC 101 and Commissioners of Inland Revenue v Brown (1926) 11 TC 292.

Dr Brice’s list at paragraph 58 of her decision in Shepherd summarises the relevant factors in much the same way. Ignoring, as being less relevant, points which relate to ordinary residence, the following three items in her list are worth quoting, despite the overlap between the two lists:

“- 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);

…

- 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);

- 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);”

As regards that last point, the proposition that a home elsewhere is of no consequence is not to be understood as meaning that the other home is entirely irrelevant to the necessary enquiry. That would be inconsistent with the obligation to take into account all the facts of the case. However, the existence of another home is not decisive, because of the possibility of simultaneous residence in several places.

The point mentioned at sub-paragraph (xi) in Lewison J’s list, derived from Lysaght v Commissioners of Inland Revenue, also calls for separate mention. The decision related to the common law meaning of residence as well as that of ordinary residence, though the then equivalent of part of section 336 was mentioned (Rule 2 of the Miscellaneous Rules relating to Schedule D: see Sargant LJ and Lawrence LJ, [1927] 2 KB 55 at 70 and 73, (1927) 13 TC 511 at 521 and 524).

Lysaght is an instructive case for present purposes in several respects. Mr Lysaght had lived in England and had run a company here as director and managing director until 1919. He retired but retained the post of advisory director. He sold his English residence and went to live in Ireland. During the relevant years he had no definite place of abode in England, but he came to England every month to attend directors’ meetings, remaining here for about a week each time. He contended that he was neither resident nor ordinarily resident in England: each criterion was relevant because different exemptions applied in respect of different sources of income. The Special Commissioners held that he was resident and ordinarily resident in England. Rowlatt J dismissed his appeal. The Court of Appeal, by a majority (Lord Hanworth MR and Sargant LJ, Lawrence LJ dissenting) allowed his appeal. They held that the Special Commissioners had erred in law because his visits to this country were for strictly business purposes only, not involving any choice by him of England as a desirable abode, no intention of being present otherwise than in the course of his duties and no intention of making England his home in any ordinary sense of the word, the place where he worked being “much less dependent on his own volition and independent of social considerations.”

The House of Lords allowed the Crown’s appeal, though Viscount Cave, LC, would have dismissed the appeal. The majority held that the Court of Appeal had not been justified in interfering with the decision of the Special Commissioners. Lord Buckmaster’s speech includes this passage, [1928] AC 234 at 247-8:

“It may be true that the word “reside” or “residence” in other Acts may have special meanings, but in the Income Tax Acts it is, I think, used in its common sense and it is essentially a question of fact whether a man does or does not comply with its meaning. It is, of course, true that if the circumstances found by the Commissioners in the special case are incapable of constituting residence their conclusion cannot be protected by saying that it is a conclusion of fact since there are no materials upon which that conclusion could depend. But if the incidents relating to visits in this country are of such a nature that they might constitute residence and their prolonged or repeated repetition would certainly produce that result then the matter must be a matter of degree, and the determination of whether or not the degree extends so far as to make a man resident or ordinarily resident here is for the Commissioners and it is not for the Courts to say whether they would have reached the same conclusion. This case is an excellent illustration of this particular point. The appellant’s home is in Ireland, he has no definite place of abode in England, and the circumstances in which he comes to this country and the periods during which he remains have already been stated. It could not, I think, be denied that, even although the respondent had his home in Ireland, his sojourn in this country in the circumstances and for the purposes found by the Commissioners might be so prolonged as to place his residence here beyond dispute, but none the less I understand the judgment of the Court of Appeal to mean this, that they regard the object of his visits sufficient to show that he could not be regarded as resident. They state that it was not of his own free choice but in obedience to the necessities of his position in relation to the company of John Lysaght, Ld., that he was over here, from which it would appear that the element of choice is regarded by the Court of Appeal as a factor of great, if not of final, consequence in determining residence. In my opinion this reasoning is not sound. A man might well be compelled to reside here completely against his will; the exigencies of business often forbid the choice of residence, and though a man may make his home elsewhere and stay in this country only because business compels him, yet none the less, if the periods for which and the conditions under which he stays are such that they may be regarded as constituting residence, as in my opinion they were in this case, it is open to the Commissioners to find that in fact he does so reside, and if residence be once established ordinarily resident means in my opinion no more than that the residence is not casual and uncertain but that the person held to reside does so in the ordinary course of his life.”

As Lord Warrington of Clyffe observed, [1928] AC 234, at 251, the strongest factor against the Special Commissioners’ decision that he was resident was his permanent family home in Southern Ireland, but his visits to England for business purposes, which were frequent and regular, afforded material on which Lord Warrington considered, as did the majority of the House of Lords, that the Special Commissioners could properly come to the conclusion which they had reached.

Because of the incidental relevance of the statutory provision which I have mentioned, ICTA section 336, it is convenient to set out the relevant part of the section here, although it is no longer relied on as such by either party.

“336

Temporary residents in the United Kingdom …

(2)

For the purposes of Cases … 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- …

(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.”

Subsection (3) is relatively new, but a provision to the effect of subsection (2) has been in the legislation at least since 1842.

Dr Brice held that section 336 did apply to the appellant. Lewison J held that the case had to be decided on the basis of the general law as to residence. He pointed out that if Mr Grace was in the UK other than for a temporary purpose only, the section does not apply to him, but observed that the fact that it does not apply does not of itself assist HMRC to show that he was resident generally (see paragraph 36). No reliance is placed on the section before us, either way, but Ms Simler Q.C. for HMRC argued that the Special Commissioner’s decision was affected by her conclusion on the section, and predecessors of the section feature in some of the relevant decided cases.

Looking at the matter in terms of the general law as regards residence, Lewison J held not only that Dr Brice had misdirected herself in law, but also that there was only one possible conclusion on the facts which she had found, namely that the appellant was resident in the UK. Even if he had not found an apparent error of law, therefore, he would have reversed her decision as being one which no reasonable tribunal could have reached on the primary facts found.

I can take most of the material facts from Lewison J’s summary of Dr Brice’s findings:

“10.

The relevant facts found by the Special Commissioner are as follows. Mr Grace was born on 18 May 1952 in South Africa. His parents went to Kenya when he was five years old and while there they opted to become naturalised British citizens. So Mr Grace also became a naturalised British citizen as a young child; but he still travels on a British Overseas Citizens passport which he renewed as recently as October 1998. However, he was educated at boarding school in South Africa; and qualified as a pilot in South Africa in 1971. In 1974 Mr Grace was married in South Africa to a United Kingdom citizen. However, there was a separation in 1978 when his wife returned to the United Kingdom with their two daughters. Since that time Mr Grace has had no contact with his children.

11.

Because of a lack of work for pilots in South Africa, Mr Grace came to the United Kingdom in 1979 and worked here as a pilot until 1982 when he returned to South Africa. But he came back to the United Kingdom in 1986 and in April 1987 he took employment with British Caledonian as a long haul pilot. British Caledonian was taken over in 1988 by British Airways. Thus Mr Grace had been in the same continuous employment for about a decade before the first of the relevant years of assessment. The long haul flights which Mr Grace captains take off from Gatwick or Heathrow airports. In 1987 he bought a house in Crawley which he sold in 1990 when he bought another house in Horley. Horley is near Gatwick Airport. That house cost £250,000 and has two bedrooms and a study. It was purchased with a 100% mortgage from Alliance and Leicester. The Horley house was Mr Grace’s principal residence from 1990 to 1997.

12.

In 1997 a number of things happened. First, Mr Grace and his wife were formally divorced. Second, Mr Grace’s plan to marry another UK citizen fell through. Third, Mr Grace was unhappy with life in the UK and was looking for a change of direction. His parents and brother lived in Johannesburg and he wished to see more of them. He knew Cape Town well because his sister had lived there and he had friends there. He made some work trips to Cape Town and then decided that he would live there and commute to the United Kingdom for his work. Thus fourth, in August 1997 he set up home in Cape Town in a rented apartment. A year later he bought a three bedroom house in Cape Town.

13.

The Special Commissioner regarded 1997 as a watershed in Mr Grace’s life. So she turned to consider what links he had with the United Kingdom after that time in order to consider whether he continued to reside there.

14.

Her salient findings are as follows. First, he has retained the Horley house in the United Kingdom which he uses in order to rest before or after carrying out his duties as a long haul pilot or if he has only a few days between flights. The house is fully furnished and equipped. He is on the electoral roll at Horley as a resident. Post is sent to him at the Horley address. This includes credit card statements, bank statements and correspondence with HMRC. He keeps a car in the United Kingdom and uses it to travel from the Horley house to work and from work to the house. The present car is six years old and has done 33,600 miles which accounts for the journeys from his house to work and back. He also keeps a car in Cape Town. He has a bank account in the United Kingdom into which his salary from British Airways is paid. Although he is registered with a dentist in Horley he has only visited one dentist in the entire time that he has been in the United Kingdom; and that was the British Airways dentist at Gatwick whom he visited privately. He has visited his doctor in Horley four times between 1993 and 2003. He has no relatives in the United Kingdom. His ex-wife and daughters live in the United Kingdom but he has had no contact with his children for over 30 years. He has only met his ex-wife twice in the last thirty years. He is a member of the professional body of the British Airline Pilots Association but is not a member of any other club or society in the United Kingdom.”

Dr Brice had to consider two rival day counts of the time spent by the appellant in the UK and in South Africa during relevant years. She expressed her conclusion on this as follows at her paragraph 23:

“On the evidence before me I find that the pattern of the Appellant’s life after 1 September 1997 was that the long haul flights he made would last about four or five days. For two or three days before or after each flight he would stay in the United Kingdom. He piloted a number of flights to and from Cape Town. In addition there were regular breaks of thirteen to fifteen days which were spent in Cape Town. I conclude that the time spent in the United Kingdom was time either before or after a flight, or time when the Appellant was sick, but that most of the other time not spent in the air was spent in Cape Town.”

Thus, the enquiry which she had to undertake involved assessing the duration of Mr Grace’s presence in the United Kingdom and the regularity and frequency of his visits, the nature of the visits and his connection with this country. Equally, she had to take into account also his connection with South Africa, including his ownership and use of a house there, and his activities, ties and other connections there. She could not regard his ownership and use of a house there as conclusive that he did not reside in the UK, but it was a relevant factor to be taken into account.

Dr Brice addressed first the question of residence, from paragraph 31 to paragraph 44 of her decision. She referred to the case of Young, about a master mariner who had a house in Glasgow where his wife and family lived, as he did when in the UK, but who spent only 88 days in the relevant year in the UK because of his absences at sea. He was held to be resident in the UK. As Dr Brice said, the facts were distinguishable because Mr Young had no other residence, whereas Mr Grace did. That is a fair point, so far as it goes. She next considered Cooper v Cadwalader, where Mr Cooper was no doubt resident in New York, but was found to be resident in the UK as well because he spent two months of the relevant years in this country where he had taken a lease of a property which he used for shooting parties. In that case the General Commissioners had held that Mr Cooper was not resident, but the Court of Exchequer in Scotland allowed the Crown’s appeal. That decision did turn in part on the predecessor of section 336, (section 39 of an Act of 1842, 5 and 6 Vict., cap. 35), but the Court held that Mr Cadwalader was resident on ordinary principles unless he fell within the exception in the section, and that he did not because he was not in the UK for a temporary purpose only and not with any view of establishing a residence in the UK. Dr Brice referred to the Lord President’s observation that Mr Cadwalader’s occupation of the rented property “is not of a casual or temporary character, but is substantial and as regards some of its incidents is continuous”. In that part of his judgment the Lord President was addressing the general law, not the statutory exception, to which he turned later. On the exception, the three members of the court differed in emphasis. Lord Adam said there might be a question whether coming to shoot for a few months of the year was to be considered a temporary purpose, but that the decision on the general principle as regards residence meant that he was here in order to establish a residence. Lord Maclaren allowed for a possible difference of opinion as to the intention of establishing a residence, but said that this could not be regarded as a temporary purpose, which he said meant casual purposes rather than presence in pursuance of regular habits of life, or in other words “casual or transitory residence as distinguished from a residence, of which there may be more than one, but which may be habitual or permanent”. The Lord President explained his conclusion on the section as being based on the proposition that Mr Cadwalader took the property with the view of establishing his residence there during a material part of each year.

Dr Brice drew from Cooper v Cadwalader the undoubtedly correct proposition that a person can be resident in two different countries at the same time. She then considered two decisions of Rowlatt J, Zorab and Brown, from which she had derived the first of the propositions which I quoted from her decision in Shepherd at paragraph [7] above, and Lewison J took his proposition (iii) in paragraph 3 of his judgment in the present case. She then said this:

“37.

Applying those principles to the facts of the present appeal it is relevant that, after 1997, the nature of the Appellant’s presence in the United Kingdom was to get to and from his work. He had very few connections with this country. He was not born here, he was not educated here, and no members of his family lived here apart from his divorced wife and children whom he has not seen for thirty years. He had no social life here. He did reside here from 1986 to 1997, during which time he began his present employment which he has retained, but in the relevant years of assessment he only visited the United Kingdom because each of his long haul flights started and ended here. The Appellant’s lack of connections points to the view that, although he might spend time in the United Kingdom each year, he is not necessarily resident here.”

That is not a conclusion in itself, though it points in the direction of the eventual conclusion of non-residence. Ms Simler pointed to the word “only” as applied to Mr Grace’s coming to this country in order to perform the duties of his employment. The same word occurs in other parts of the decision, as I shall show, and she submitted that, cumulatively, these revealed an error of law in the Special Commissioner’s reasoning, similar to that made by the Court of Appeal in Lysaght.

Dr Brice then referred to Levene and Lysaght, and quoted well-known passages from Levene as to the meaning of “reside”. She continued as follows:

“40.

Ms Simler relied upon Levene for the principle that the word “to reside” meant “to dwell permanently or for a considerable time”. Applying that principle to the facts of this appeal I find that after 1997 the Appellant did not dwell permanently in the United Kingdom as his permanent residence was in South Africa. Also the United Kingdom was not where he had his settled or usual abode as that was in South Africa. During the years of assessment the subject of the appeal the Appellant left Cape Town for business purposes only. Although he retained a house in the United Kingdom that house was not in the nature of a home but was rather a substitute for hotels.”

Ms Simler criticised that passage in three respects: the use of the word “as” in the second and third sentences, the word “only” in the fourth sentence and the comment about hotels in the last sentence. Her first point is to suggest that Dr Brice should be understood as saying that because the appellant had his permanent residence, and his settled abode, in South Africa, he did not have it in the UK, or in other words that to have a permanent residence in one country excluded the possibility that he had one in another. She cannot have meant that. It would be inconsistent with what she had said at paragraph 33, referring to Cadwalader, with what she had quoted from Viscount Cave LC in Levene in paragraph 38, and with the eighth of the points made in her list in Shepherd, referring to both those cases. Moreover, it does not seem to me that she was expressing a conclusion as to residence in this paragraph. What she did was to apply parts of the OED definition, as set out in Levene, to the facts of the present case.

In the fourth sentence of paragraph 40 she used the phrase “for business purposes only”, as in paragraph 37: I will revert to that later. In the last sentence her phrase “not in the nature of a home but ... rather a substitute for hotels” is open to the comment that one can be resident in a country even though one stays in one or more hotels, not in a house or flat, as in Lysaght.

Next she looked at Combe, and considered the proposition that, in the case of a taxpayer who has been resident in the UK, the making of a “distinct break” in his pattern of life, including establishing a residence elsewhere, may mean that even lengthy or regular visits to this country may not amount to continued or resumed residence. At paragraph 42 she said this:

“Applying that principle to the facts of the present appeal I find that although the Appellant was resident in the United Kingdom before 1997 in that year there was a distinct break and since then his settled mode of life has been in South Africa. In 1997 he set up home in South Africa and purchased a house there. The home is near his parents and brother. He is very attached to his private aeroplanes and it is significant that they are all in Cape Town and that there are none in the United Kingdom. He intends not to return to the United Kingdom when he retires. Since 1997 he has returned to the United Kingdom but only for the purpose of his employment.”

Ms Simler argued that the change in the appellant’s way of life was not sufficient to amount to a distinct break, and also criticised, here as elsewhere, the reference to his returning to the UK “only for the purposes of his employment”.

In paragraph 44, Dr Brice said that Mr Grace was not resident in the UK, on the principles established by the cases, though she came back to this later and explained her conclusion more fully.

She went on to address ordinary residence, on which (as such) nothing now turns, and then the statutory provisions, of which section 334 (to which I do not need to refer) does not apply to the appellant, and section 336, she said, did apply. Her reasons were set out in paragraph 59:

“59.

In my view, leaving aside the availability of living accommodation, all the factors mentioned above point to the conclusion that after September 1997 the Appellant was in the United Kingdom for temporary and occasional purposes only. He was here in order to do his work and for no other reason. He had no intention of establishing his residence here and his intention was to establish his residence in South Africa. Thus in my view section 336 applies to the Appellant so that he is not to be treated as resident in the United Kingdom.”

Then she summarised her conclusions as follows at paragraph 60:

“60.

I conclude that the questions whether the Appellant was resident and ordinarily resident in the United Kingdom in the years in question are matters of fact and degree. Taking into consideration all the evidence before me, and the facts I have found, especially having regard to the Appellant’s past and present habits of life, the reasons for his visits here, the temporary nature of his ties with this country, the more permanent nature of his ties with South Africa, and the distinct break made in 1997, I have come to the conclusion that from 1 September 1997 he ceased to be resident and ordinarily resident in the United Kingdom. After that date this was not where he dwelt permanently nor where he had his settled or usual abode which was in South Africa. Residence here did not have a settled purpose. I also conclude that the Appellant was not ordinarily resident here.”

It seems to me that there is force in Ms Simler’s criticism of the Special Commissioner on the basis of her repeated references to visits for business purposes only, and the like. Mr Gammie submitted, fairly, that it is not irrelevant to observe that although the appellant did come to the UK on a regular basis, he did so only for the purposes of performing the duties of his employment, so that it was neither inaccurate nor unfair to use a phrase such as “for business purposes only”. That would justify the second sentence of paragraph 59: “He was here in order to do his work and for no other reason.” I have more difficulty with the previous phrase: “after September 1997 the Appellant was in the United Kingdom for temporary and occasional purposes only”. It is true that this was in the context of section 336, which is why the Special Commissioner expressly ignored the availability of living accommodation: see section 336(3). I do not see that this is a tenable conclusion, any more than it would have been in Lysaght. It seems to me that Mr Grace’s presence in this country before every outward long-haul flight, and between flights on some occasions, this country being the base from which he operated as a pilot, does not fit the statutory words “who is in the United Kingdom for some temporary purpose only”. I would accept that he was not here “with the intention of establishing his residence” here. He had previously established his residence here and the question is whether he had retained it or not. However, for the section to apply, both requirements have to be satisfied. Accordingly, if anything turned on the application or otherwise of section 336, I would regard the Special Commissioner as having misdirected herself on that point because he could not properly be described as “in the United Kingdom for some temporary purpose only”.

Lewison J dealt with section 336 at paragraph 36, in the course of which he said this:

“He had been in the same employment since 1987, and had thus been in that employment for a decade before the first of the relevant years of assessment. Performance of his duties under his contract of employment was part of his settled pattern of life. I agree with Ms Simler that presence in the United Kingdom in order to fulfil duties under a permanent (or at least indefinite) contract of employment cannot be described as casual or transitory. Standing in any of the years of assessment the objective observer would have known that Mr Grace would continue to be present in the United Kingdom to fulfil those duties in subsequent years, unless and until he changed jobs or retired. The recurrent nature of his regular presence in the United Kingdom leads inevitably to the conclusion that his purpose for being here is neither casual nor transitory. It simply cannot be described as a temporary purpose.”

Although section 336 is not relevant directly, Ms Simler argued that the Special Commissioner’s conclusion on residence was infected by her false conclusion on the section. In particular, taken with Dr Brice’s repeated references to his visits to this country having been for business purposes only, Ms Simler submitted that this showed that the Special Commissioner was (wrongly) treating the appellant’s regular and repeated presence in this country as being “temporary and occasional”, and that this was reflected in her assessment of the various factors relevant to the common law issue of residence. As the judge put it at paragraph 41, Ms Simler submitted that Dr Brice’s conclusion under section 336 had led her to discount the factor of the appellant being present in this country in order to discharge the duties of his employment beyond what was legally permissible.

She also argued that Dr Brice had been wrong at paragraph 42 to find that there had been a distinct break in the appellant’s pattern of living. The demands of his employment did not change in 1997, and the time which he spent in the UK attributable to his employment did not change. In that respect there was continuity in his pattern of existence. What did change was the place where he spent that part of his time when his whereabouts was not dictated by his employment. Lewison J considered that Dr Brice had been wrong to find a distinct break, and I am inclined to agree with him on this. In his paragraph 43 he said this, after a brief discussion of the concept, though he did not base his decision on this point:

“It is not, therefore, profitable, to attempt to define what it means if used (as the Special Commissioner used it) as a tool to help decide whether Mr Grace was resident in the United Kingdom. However, I agree with Ms Simler that the facts of the present case fall far short of those which, in other cases, have been held to amount to a “distinct break”.”

Lewison J also accepted Ms Simler’s criticism of the Special Commissioner as regards her use of the word “as” in paragraph 40. As I have mentioned at paragraph [23] above, I do not agree with this criticism, though I do agree that Dr Brice’s reasoning is expressed in a rather compressed way at that point in the decision.

As I have mentioned, Lewison J held that, even if the appellant does not satisfy section 336, it does not follow that he is resident for tax purposes. I agree with him on that. Specifically, the fact that his presence in the United Kingdom cannot be said to be “for temporary purposes only” so as to come within the section, does not of itself show that his presence does amount to residence according to the common law test, because that presence must, for that purpose, be assessed in the light of all other factors including in particular those connecting him with another country.

For the reasons given in paragraph [30] above, I agree with Lewison J, and with Ms Simler’s submissions, that the Special Commissioner did misdirect herself in law as regards her treatment of the appellant’s presence in this country in order to fulfil the duties of his employment for the purposes of section 336. I also agree with them that this misdirection affected her decision as regards residence generally. Among the other points taken, I agree with Lewison J’s comments about the status of the appellant’s house at Horley as a “home”: see his paragraph 40. Dr Brice’s reference in paragraph 60 to the “temporary nature of his ties with this country” follows from her conclusion on section 336.

However, Lewison J went on to say that, not only had Dr Brice misdirected herself in law, but, on a proper direction, there was only one possible answer on the primary facts found, namely that the appellant was resident: see his paragraph 44.

Respectfully, I part company from the judge on that. I agree that a finding of residence is a possible conclusion, and perhaps a likely one, but it does not seem to me that it would be right for the court to pre-empt the decision of the Special Commissioner on that issue. The responsibility of the Special Commissioner to make such decisions, having found the primary facts, is stated and repeated in many of the cases, including the passage which I have cited from Lord Buckmaster in Lysaght at paragraph [11] above. Of course there are cases in which, on a correct view of the law, only one conclusion is possible, but it seems to me that the courts ought to be particularly cautious in substituting their own view on this.

The judge’s view that only one answer was possible is based on what he had said at paragraphs 36 and 41 of his judgment. He rejected the Special Commissioner’s characterisation of the appellant’s presence in this country as being for temporary and occasional purposes only, and her observation in paragraph 60 that his presence here “did not have a settled purpose”, the latter phrase being specifically relevant to ordinary residence (see item (x) in the judge’s list). What effect does that conclusion have on the balancing exercise that is necessary in accordance with the principles which he had set out in his judgment and Dr Brice had listed in her decision in Shepherd? In particular, does it necessarily override or prevail over factors pointing away from residence in this country, such as the appellant’s connections of choice with South Africa? It seems to me that it would be wrong to treat the appellant’s presence for the purposes of his employment as a factor which necessarily shows residence. It may well be a strong pointer in that direction, but the decisions in Scotland, in the House of Lords and by Rowlatt J show clearly the need to take into account, weigh up and balance all relevant factors. I do not think it would be right to regard Mr Grace’s presence in this country in order to perform the duties of his employment as a trump card which of itself concludes the issue in favour of residence.

I can see that Lysaght provides substantial support for HMRC’s view that the appellant was resident in the relevant years, but even as summarised by Lewison J in his paragraph 3(v) the proposition is that such regular periods of physical presence may amount to residence, not that they do. Both Dr Brice’s summary, in the first point quoted at paragraph [7] above, and that of the judge at his paragraph 3(iii) recognise that the Special Commissioner must look at all relevant factors together and reach a judgment after considering them all. It seems to me that this exercise ought now to be carried out again, without misdirection, by the tribunal entrusted with that task by the statute. In Cooper v Cadwalader the Court of Exchequer in Scotland did reverse the Special Commissioners’ decision, rather than remit it, but it seems to me that the facts in that case were a good deal more simple and straightforward, so that it was possible to conclude that only one result was possible on the facts as found. In the present case I do not think it is open to the court to take the same course. Though the court can decide (as I would) that the appellant’s presence in this country in order to perform his tasks as a BA long haul pilot, with whatever regularity and length of stay that is involved, using the house which he has retained in Horley, is not such as to qualify as presence “for some temporary purpose only”, so as to come within section 336, it is not for the court to decide how the balance stands as between that and related factors connecting the appellant with this country on the one hand, and his connections with South Africa on the other hand, in terms of satisfying the non-statutory tests for residence and ordinary residence.

For that reason, although I agree with the judge that the Special Commissioner misdirected herself, and I consider that he was right to allow the appeal, in my judgment he ought to have remitted the issue for re-determination. That is the order that I would make, allowing the appellant’s appeal though only to that extent. The remittal will be to the First Tier Tribunal (Tax Chamber). We have had the benefit of written submissions from the parties in the light of the draft version of this judgment. In the light of those the court’s order will be that the appeal is allowed and the question of the appellant’s residence (and, so far as necessary, ordinary residence) be remitted to the First-Tier Tribunal (Tax Chamber) for reconsideration (if practicable, by Dr Brice) in the light of our judgment. The parties are to apply to the Tribunal for directions as to that reconsideration. Because the appellant has succeeded as regards remittal but not as far as to show that Dr Brice was not in error, we will make no order as to the costs of the appeal.

I agree.

I also agree.