Darryn Lyons v The Commissioners for HMRC

On the first day of the hearing Mr Brinsmead-Stockham made an application to admit an additional bundle of evidence on behalf of HMRC. The bundle contained:

Ms Hardy objected to the application on the basis that it was unfair for the evidence to be produced at this late stage. Mr Lyons did not recall the documents and the Witness Statement said to be in his name was not signed. The evidence provided by Mr Regan could not be tested in this hearing and the LinkedIn pages were unreliable given that those concerned were not present to be questioned and people have various reasons for providing inaccurate information in their LinkedIn profiles.

Mr Brinsmead-Stockham expressed surprise that Mr Lyons did not recall the very high profile evidence given to the Leveson enquiry, but in any event the transcript recorded his evidence. The purpose of the evidence was to put matters to Mr Lyons himself and he could be expected to speak directly about the documents.

Rule 15 of the Tribunal Procedure Rules states that we may exclude late evidence where it would otherwise be unfair to admit the evidence. This is in the context of the wide case management role given to thetribunal in which we must have paramount regard to the overriding objective to act in the interests of justice and fairness. In accordance with the principles set out in decisions such as First Class Communicationsv HMRC [2013] UKFTT 342 (TC) we have considered that:

We therefore concluded that we would admit the evidence. However, this left the question of what weight to give it.

As a starting point, evidence from a person which is not tested in cross-examination should be given less weight and we could see no reason to depart from that principle in this case in relation to the evidence of a third party witness statement. Similarly, the LinkedIn evidence could not be tested and there may be numerous reasons why a person’s LinkedIn profile would be inaccurate. Therefore we would also give that evidence little weight.

Ms Hardy submitted that very little weight can be placed on the Leveson inquiry documentation.Mr Lyons’s failure to explain the claimed demise of Big Pictures Ltd to the inquiry was explained in re-examination: “you would not want to send a negative message out in a very public situation”. We agreed that the context of that evidence should be taken into account by us. That was a very public, highly reported inquiry which may influence the way in which Mr Lyons described his business, particularly at a time when he had concerns over its long-term viability. We have therefore given greater weight to the evidence of Mr Lyons and Mr Stanford, the latter of whom described very clearly the significant problems faced by Big Pictures Ltd in 2011-2012.

We were provided with a PDF bundle of 1047 pages and a supplementary bundle of 99 pages. We heard oral evidence from: Mr Lyons, Mr Andrew McMichen (a solicitor who advised Mr Lyons in 2011/2012), Ms Ebony Raby (who was Mr Lyon’s executive assistant in Australia from 2012), Mr Paul Bongiorno (a partner in the accounting firm of MacMillan Cowan & Co in Australia who was advisor to Mr Lyons), Mr Zulfi Vargo (an estate agent in London), Ms Tania Slater (a friend of Mr Lyons), Mr Lindsay Stanford (a professional consultant and advisor to Mr Lyons in the UK) and Mr Mario Gregorio (the CEO of Mr Lyons’ business operations in Australia).

In relation to the reliability of witness statements prepared some time after relevant events, we start with referring to the oft-quoted principles stated by Legatt LJ in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) (at paras 15-22) which, in particular, identify that:

“Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs… Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial…

…[So that] “it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

Ms Hardy submitted that we should apply the approach adopted in Batten v HMRC [2022] UKFTT 199 TC and we agree. As stated there, the Court of Appeal made clear in Kogan v Martin & Ors (Rev 1) [2019] EWCA Civ 1645 (at para 88) that the Gestmin guidance does not prevent reliance upon witness statements.

“A proper awareness of the fallibility of memory does not relieve judges of the task of making findings of fact based upon all of the evidence.”

The same emphasis on the duty to consider all of the evidence and determine the weight to be given to it was stated in BXB v Watch Tower and Bible Tract Society of Pennsylvania and Trustees of the Barry Congregation of Jehovah’s Witnesses [2020] EWHC 156 (QB) although the fallibility of memory should be recognised.

We have therefore considered the evidence overall in assessing the weight to be given to matters in the Witness Statements. However in relation to Mr Lyons’ evidence he made it clear on various occasions that he had never seen certain exhibits to his Witness Statement before the hearing. This is a matter of concern. The Witness Statement should reflect the evidence of the witness and should refer to exhibited documents which the witness wishes to rely upon and can address. The fact that Mr Lyons stated that he had not seen some of the documents before clearly called into question the extent to which the evidence was truly his, or instead was a document prepared by professionals. While it is recognised that those representing parties will routinely draft documents such as witness statements, those drafts must reflect the evidence the witness wishes to give and not the evidence which the professional considers the witness should give.

In addition, Mr Lyons was not a good historian. There were numerous matters which he could not remember. While we recognise that Mr Lyons is not a person who is comfortable dealing with paperwork and administration, many of the matters about which he was asked in cross-examination were practical matters relating to the events in 2010-2012. On occasion his lack of memory strayed into the realms of being disingenuous; for example, when he said that he could not recall having other cars beyond his Ferrari and Range Rover despite the fact that we heard from Ms Bullock that he had several other cars including a Jaguar and a Lamborghini.

His Witness Statement failed to make clear (as became apparent during the hearing) that numerous matters were not matters within Mr Lyons’ own knowledge but were statements of information provided to him by others; for example, Mr Lyons confirmed that any financial information including bank information in his Witness Statement should be read on the basis that it was information told to him by his accounts department.

On occasions Mr Lyons’ evidence stretched the bounds of plausibility and/or was inconsistent with the evidence of others around him. For example, when asked why his UK tax adviser had worked on a Cypriot company structure to shelter the capital gains expected to arise on disposal of Mr Lyons’ UK properties, assuming that he was UK resident, and had otherwise entered into correspondence (including correspondence with HMRC) on that basis, Mr Lyons had said that he had not told his adviser about his plans. He struggled to explain why this would be, suggesting that he had no knowledge of tax systems and therefore did not think it would be relevant even though it was clear that Mr Lyons had taken on board specific advice by his adviser to minimise his days in the UK in 2012-2013 for UK tax reasons. Another suggested reason given by Mr Lyons for not telling his adviser his plans was a concern about confidentiality, but Mr Lyons recognised that he had no reason to think that his adviser would breach his duty of confidentiality. The adviser, Mr McMichen, made clear that he had provided advice on the basis of information given to him at the relevant times, as we would expect.

We have therefore treated Mr Lyons’ evidence at times with caution. Where it is inconsistent with other evidence we have relied upon that other evidence.

Given Mr Lyons’ consistent evidence that he delegated all administrative matters and had no knowledge of even which bank accounts or credit cards were operated by him when, we have concluded that, for example, Mr Lyons’ evidence about such matters should be given little weight so that where there are no contemporaneous documents showing the position at the relevant times we have declined to rely upon Mr Lyons’ generally vague or broad brush assertions by themselves.

We found the evidence of the other witnesses to be generally internally consistent and reliable and we have given that evidence full weight. The evidence of Mr Stanford described some events (in particular the sale of the UK properties) in different terms to Mr Lyons. Mr Lyons’ evidence was that the sale of the UK properties was in order to loosen his ties to the UK whereas Mr Stanford explained that the properties were sold in order to provide funds for Mr Lyons to pay outstanding tax bills. Given our conclusions regarding the reliability of Mr Lyons’ evidence and the fact that we found no reason to reduce the weight given to Mr Stanford’s evidence, we have made our findings on that matter on the basis of the latter’s evidence. Mr Sandford’s evidence is consistent with the evidence in correspondence with HMRC in 2012.

At times some of the evidence of Mr McMichen strayed into opinion regarding Mr Lyons’ residence status. Where that has occurred we have excluded that evidence from our consideration. Mr McMichen is not acting as expert and it is the preserve of this tribunal to decide Mr Lyons’ residence status as a matter of fact at the relevant time.

The parties provided an agreed statement of facts. We set out the agreed facts in italics in the following findings.

Mr Lyons was born in Australia in 1965 and first came to the UK in 1987.

He initially came to the UK on a holiday working visa and then continued to live and work here. In 2012 Mr Lyons had been living and resident in the UK for 24 years.

Mr Lyons incorporated Big Pictures (U.K.) Ltd ("Big Pictures"), a UK photography agency, in 1996.

Mr Lyons had initially started the business of Big Pictures in the UK in 1992. The business specialised in providing celebrity photographs to the media. During his time in the UK Mr Lyons himself acquired celebrity status, appearing on television and radio and writing magazine and newspaper articles. He became involved in various dot com businesses including his own Mr Paparazzi.com. In 2011 he took part in Celebrity Big Brother in the UK and in early 2012 he went to Australia to take part in a celebrity programme called “Excess Baggage”.

Mr Lyons set up an Australian arm of Big Pictures called Big Australia Pty Limited ("Big Australia") in 1996.

He expanded his Australian business interests and in 2011 and 2012 acquired and developed a restaurant, hotel and nightclub with a view to his return to Australia to live there permanently.

However, all of the description of his business interests must be seen in the context of a person who did not enjoy paperwork, administration or the detail of day to day operations of a business. He employed others to carry out those activities and considered himself better placed to focus on the creative or design elements of businesses or more strategic decision- making.

Mr Lyons was married and divorced some years before the period with which we are concerned. A relationship started with Elissa Friday in 2010 who lived in the UK. She later became his fiancée. At the time of his return to Australia in June 2012, Ms Friday was studying in London. They did not live together on 6 April 2012. Ms Friday joined Mr Lyons in Australia on 8 June 2013 and they were engaged in August 2013. However, the engagement broke off at some point later.

Mr Lyons provided a domicile statement to HMRC in December 2003 in which he stated that:

In the hearing Mr Lyons initially said that he did not return to Australia four or five times per year in 2003, but inconsistently he did not accept that the statement was therefore incorrect. Given our approach outlined to Mr Lyons’ evidence, we have given greater weight to the domicile statement to conclude that Mr Lyons generally returned to Australia several times each year.

Mr Lyons always planned to return to live in Australia eventually, but in 2010 he decided to work towards that and during 2011 he developed more concrete plans. Much of his success had derived from selling photographs to publications such as the News of the World. Its demise in the summer of 2011 was a major problem for the Big Pictures’ business. Mr Stanford estimated it caused an 80% reduction in the business and led to the company being placed into administration in September 2012. That business was therefore dying and provided less reason to stay in the UK. On the other hand Mr Lyons’ elderly parents (both of whom had health issues) were in Australia and were an added reason to return there as he had always planned.

Mr Lyons appeared in Series 8 of Celebrity Big Brother (UK) from 18 August – 8 September 2011.

In May/June 2011, Mr Lyons was invited to take part in the television programme “Celebrity Big Brother (UK)”. His contract was entered into in July 2011 and he entered the Big Brother house in August 2011 for four weeks. He made it to the end of that series of Celebrity Big Brother on 8 September 2011.

Mr Lyons was then hired to take part in an Australian celebrity challenge series called “Excess Baggage”.

Mr Lyons flew to Australia on 30 October 2011 and signed a contract with Excess Baggage, an Australian television show, on 4 November 2011.

Mr Lyons completed the filming for Excess Baggage over the (Australian) summer period and filming stopped on 21 March 2012.

The flight bookings were originally made on 19 April 2011, on the basis that Mr Lyons would have flown to Melbourne, Australia on 1 October 2011, with the return flight to London, UK departing on 27 February 2012. Those bookings were made before the Excess Baggage work arose. Mr Lyons subsequently had the flights changed due to his Australian work commitments on the Excess Baggage production. Excess Baggage paid for the rearranged flights and the cost of a holiday which had previously been planned in the period in Thailand, The return flight was changed to 28 April 2012, arriving in the UK on 29 April 2012.

Mr Lyons had a contractual obligation to remain in Australia until the end of April 2012. Although filming of Excess Baggage in fact finished on 9 March 2012, under the contractual arrangements Mr Lyons was required to remain in Australia for a month after the finale aired.

Mr Lyons confirmed that the evidence in an email setting out a timetable for the filming of Excess Baggage was broadly correct. That showed that for the bulk of the time from 28 November 2011 Mr Lyons was working on the Excess Baggage Production. This was consistent with Mr Lyons’ oral evidence that he recalled that filming took place on most days. The particular relevance of this is in the context of the extent of his activities in Australia at that time, which we come back to below.

Mr Lyons’ girlfriend, Elissa Friday, flew from the UK to Australia and they went on holiday, including visiting Lizard Island.

Mr Lyons returned to the UK on 29 April 2012.

Mr Lyons declared himself to be resident in Australia for Australian tax purposes from 1 April 2012 onwards onthe advice of his Australian tax accountant.

He was present in the UK for 38 days in the UK tax year 2012/2013 (between 29 April and 7 June 2012).

Mr Lyons returned to the UK on 29 April 2012 to deal with various matters involved in relocating to Australia. He was concerned to deal with his catalogue of photos himself as many of them were highly sensitive celebrity and royal images. He also had more than 20 years of belongings which he had accumulated to sort through. He worked with the packers in getting his belongings packed. However, as at 26 July 2012 when Mr Lyons had left the UK for a trip to France before relocating to Australia, there was still a substantial quantity of items to be transported to Australia from his offices in the UK and his Kensington home. A quotation was obtained for sole use of a 40 foot container to transport the items. Quarantine was arranged for his dog, Amber and he arranged the archiving of about 80 filing cabinets of archives.

An invoice issued by packers shows that the archive had been moved to a Watford warehouse in May 2012. It was then shipped to Australia in February 2014.

In the days spent in the UK between 29 April and 7 June 2012 Mr Lyons also said goodbye to friends and liaised with Goodsir Graham in relation to the potential sale of his UK property interests.

Big Pictures became insolvent and went into administration on 27 September 2012. The company went into creditors' voluntary liquidation on 10 January 2013.

Based on the records held at Companies House, as at 30 October 2011, Mr Lyons was a director of the following UK companies:

Mr Lyons resigned as an employee from Big Pictures in May 2012.

Based on the records held at Companies House, Mr Lyons was at no time a director of Celebstock Limited. This was a company set up for a possible joint venture which did not come to fruition.

Mr Lyons became a director of Mr Paparazzi Online Limited, a UK company which was incorporated on 16 August 2012, with Nigel Reagan as a director and shareholder. Mr Lyons was appointed as a director on 28 May 2013 and the company was dissolved on 2 December 2014.

The company was established by Mr Reagan to collect any revenue earned from copyright associated with the brand name “Mr Paparazzi”. It was dissolved on 2 December 2014, without ever having traded.

Mr Paparazzi.com Ltd operated MrPaparazzi.com which was an online celebrity blog, covering celebrity breaking news. Mr Lyons remained a director of Mr Paparazzi.com Limited until it was dissolved in August 2014.

Mr Lyons had attempted unsuccessfully to sell Big Pictures in 2008. It had started to face problems during the financial crisis, facing particular competition from a competitor company called Getty Images which was charging less for photographs.

Mr Lyons attempted again in 2010 to sell Big Pictures to Kit Digital in 2010, but the sale fell through in December 2010. The business had been valued at around £7 million in August 2010. However, an indicative term sheet for the acquisition showed a value of approximately £5.5 million plus future earn-outs. At the same time the sale of Big Pictures Australia had been envisaged. The sale did not proceed because of financial problems faced by Kit Digital.

At the hearing Mr Lyons consistently described delegating the running of his businesses in both the UK and Australia to others. While he enjoyed creative input he left all financial and administrative matters to others. His evidence was therefore consistent with that given to the Leveson enquiry (on 9 February 2012) where he said in relation to Big Pictures UK that there had been a consistent pattern over the past five years in that he was away a lot and trusted his management team to take necessary action in his absence. Mr Lyons sought to distance himself from this evidence given to the Leveson enquiry but given the consistency with the other evidence regarding the operation of his businesses we find that the description reflected Mr Lyons’ involvement with his company in the period 2007-2012.

However the evidence of Mr Stanford showed that there was another element to Mr Lyons’ distancing himself from the Big Pictures business in the UK: Mr Lyons had engaged Mr Stanford to work on the possibility of floating Big Pictures and Mr Lyons’ celebrity status and persona did not fit the mould for a public company. Brokers wanted to see particular types of people fronting a listed company.

Mr Stanford had only intended to work upon the digitisation of Big Pictures’ business and possible flotation, but he discovered that the company was in a financial and administrative mess. Mr Lyons did not have the necessary skills to sort out the problems and lacked suitably skilled personnel to assist him. The company was not paying its VAT and income tax bills on time. So, Mr Stanford became more involved in the summer of 2011 in the hope that he could turn the company around because it was clear that it was “just a shambles”. At that time Mr Lyons held the position of both Chairman and Managing Director but he gave up the latter in 2011 because he was going to Australia and could not be involved in the business day-to-day. Mr Reagan was initially appointed as CEO and his appointment was later followed by that of Mr Samuels. However there was a time before June 2012 when the only person with any formal position in the company was Mr Lyons.

At some point in 2012 Mr Stanford reached the view that the Big Pictures business could not continue. He set this in the context of describing two main problems for the business: people no longer wanting to buy paparazzi pictures and the mounting outstanding tax liabilities. The closure of the News of the World in July 2011 and the shutting down of other news outlets caused a drop of over 80% of the company’s business overnight. The Leveson enquiry then destroyed Mr Lyons’ ability to recover any ongoing business and Sienna Miller was suing the business for around £750,000. Mr Lyons’ flamboyant lifestyle stopped overnight.

The Leveson inquiry took place, November 2011 to June 2012. It was therefore in the context of that timing that the most dramatic change to Mr Lyons’ business took place.

Mr Lyons resigned as an employee from Big Pictures in May 2012 on the advice of his UK tax adviser, Mr McMichen. Although Mr Lyons said that he had ceased being actively involved in the company or receiving a salary from sometime in 2011 (possibly August 2011) the evidence in the bank statements shows payments being made up to October 2011 at least. Unfortunately Mr Lyons was unable to identify what the payments were for. His 2012/13 UK tax return shows no employment income received from that company and by that stage the company was struggling so that ceasing to pay Mr Lyons a salary from some point between October 2011 and April 2012 is consistent with its financial problems. We therefore conclude that he was not receiving a salary at that time, but he remained involved with the company and its operation. His continued involvement with the business at some level is hardly surprising. Big Pictures had formed the core of Mr Lyons’ business activities for many years by 2011.

Big Pictures Ltd became insolvent and went into administration on 27 September 2012. Mr Lyons had not wanted to take this step because he perceived reputational loss, but he was advised by Mr Stanford that otherwise he would be liable as a director of a company which was trading whilst insolvent.

In December 2010 Mr Lyons’ archives of celebrity photographs in the UK and Australia were valued at around £10 million.A Jersey resident company called BPPG Ltd, the shares of which were owned 90% by Mr Lyons’ Jersey trust and 10% by Mr Lyons exercised an option to buy the archive for £164,000 from Big Pictures with a view to operating a digital database.

Big Pictures Ltd went into creditors' voluntary liquidation on 10 January 2013.

When Mr Lyons went to Australia for the Excess Baggage work in October 2011, although he was a director of 9 UK companies, each of the UK companies was either dormant or (in the case of Big Pictures) was in financial difficulties. Mr Lyons continued as before to leave the detailed operation and management of Big Pictures Ltd to others, and, in particular, to Mr Sandford.

Mr Lyons was a partner in the Monarch Film Partnership, a UK partnership generating significant amounts of income. The Partnership Return for 2012/13 recorded his address as 86A Kensington Court.

The annual returns filed in the period 26 November 2011 - 28 May 2012 for all of Mr Lyons’ companies recorded that his address was 86A Kensington Court and that he was resident in England.

Mr Lyons owned the following UK investment properties:

Mr Lyons instructed Goodsir Graham “to do a full valuation of the properties”. Mr Lyons received a valuation report for his UK properties from Goodsir Graham in July 2011. Mr Vargo gave evidence which showed that he was also instructed by Goodsir Graham to value the properties in November 2011 in preparation for sale.

Following valuation the UK investment properties were put up for sale, but the main reason for this was to raise funds to pay outstanding tax liabilities to HMRC.

Mr Lyons entered into an agreement with Rokstone Ltd, on 19 September 2011, for Rokstone to act as joint sole agents with Goodsir Graham in respect of the sale of 50-54 Clerkenwell Road.

The property was Big Pictures UK’s office. It was put on the market as the company was in trouble following the News of the World revelations (see further below).

Mr Lyons also owned (and continues to own) 86a Kensington Court, London which was his home while he lived in the UK. It was a long leasehold interest purchased in December 2000.

The property at 86a Kensington Court was not sold but was let furnished under a three-year assured short-hold tenancy from 15 February 2013.

Mr Lyons entered into a marketing agreement with Thackerays on 16 February 2012, in respect of his home at 86a Kensington Court.

Mr Lyons had been thinking about selling 86a Kensington Court for a while and had been in discussions with Mr Vargo from before Christmas 2011 but was told that that was a very quiet time for sales. He was waiting for the “right” price and Mr Vargo had thought at times that Mr Lyons may then buy something smaller in London as a home. Although Mr Vargo had contacted people he knew who potentially might be interested before the property officially came to the market, his evidence also showed that the property was not in very good condition for sale before May 2012 when a potential sale fell through.

A cleaner visited Mr Lyons’ house on a casual basis. The cleaner occasionally stayed overnight at the property after Mr Lyons’ departure. The cleaner was retained during Mr Lyons’ time at home in Australia in 2011-212 as there were viewings.

From 1998 Mr Lyons owned a two bedroom flat in Sydney where he stayed from time to time when in Australia. He still owns this property which is now let.

Between 2001 and 2008 Mr Lyons acquired various Australian properties through property trusts.

In March 2011, Mr Lyons’ Australian company, Celebrity Holdings Pty Limited, took a lease of office premises on the Ground Floor, 75-77 Moorabool Street, Geelong, Australia.

In March 2011, Mr Lyons' Australian company, Celebrity Holdings Pty Limited, took a lease of office premises on the Ground Floor, 75-77 Moorabool Street, Geelong, Australia to enable Mr Lyons to run his expanding business interests in Australia (which now included six staff) on his return. In addition, Mr Gregorio explained that Mr Lyons considered that the new offices would provide good advertising on the main street with signage. Furthermore, Mr Gregorio had been running Mr Lyons’ businesses from a room in Mr Lyons’ residential property in Australia and the office space would leave that home for Mr Lyons and Ms Friday alone.

Mr Lyons acquired various other Australian properties between 2001 and 2008 through Australian property trusts.

The further Australian properties were:

11 The Esplanade was a four bedroom house purchased and substantially renovated on purchase as Mr Lyons’ eventual home. It was rented out between February 2004 and March 2005 and subsequently refreshed for Mr Lyons’ return at some point. The property was not occupied by a tenant after March 2005. It continues to be Mr Lyons’ home now.

Mr Lyons further expanded his Australian property interests in 2014/2015 and 2019.

Mr Lyons had interests in the following Australian companies, which were all owned prior to 6 April 2012.

Mr Lyons was also a director of three other companies set up in Australia at various times for potential business opportunities but which never traded.

Big Media Productions Pty Ltd purchased Growlers, a seaside restaurant business in Geelong, Australia, in January 2011 and engaged Lara Bingle (an Australian celebrity) for promotional purposes. Big Media Productions Pty Ltd entered into a lease of the property for Growlers at 23 Esplanade, Torquay, Victoria on 1 February 2011. Big Media Productions Pty Ltd sold Growlers in December 2013.

Mr Lyons took a particular interest in the interior design of the restaurant; for example, dealing with the contractors and choosing the tiles and paint. He was in Australia when the restaurant was purchased and remained there until 20 February 2011. For that period between purchase and his departure from Australia he was involved most days in the work to redesign the property and get it ready for opening, including arranging the celebrity involvement of Ms Bingle. The restaurant opened for business in around March 2011, shortly after Mr Lyons returned to the UK.

Elephant & Castle Geelong Pty Ltd purchased the Elephant & Castle Hotel in Geelong, Australia on 17 January 2012 and subsequently refurbished it. Renovation works at The Elephant & Castle hotel commenced in May 2012. Mr Lyons was particularly involved in the design of the building and its interior.

In December 2011, renovation works were undertaken at the Eureka Hotel. This was a significant project withmajor building works undertaken.The creative design was undertaken with Mr Lyons’ involvement when he was in the UK. He approved all matters connected to the look and feel of the building. The plans and drawings which formed the basis for the works that were done were dated from 22 June 2011 and issued for pricing from 25 October 2011. The works began while Mr Lyons was in Australia for Excess Baggage. He would attend site meetings in breaks between filming for that show.

Works were also carried out on the Home House nightclub. The works were less extensive than those for the restaurant and took a couple of weeks. Mr Lyons’ involvement was again on the design side choosing interior décor.

Overall, it is clear that when Mr Lyons was not engaged with filming for Excess Baggage in Australia he would return to Geelong and spend much of his time reviewing and making decisions about the new businesses and buildings he had bought. The amount of that time varied considerably week to week dependant on the time allowed as a break from the television shows.

The evidence of Mr Lyons and Mr Gregorio show that Mr Gregorio acted as CEO for Mr Lyons’ businesses in Australia. Mr Lyons added creative input, but Mr Gregorio dealt with day-to-day running of the businesses. Mr Lyons would call Mr Gregorio for updates on a daily basis when he was not in Geelong.

However, the evidence from an article written following an interview with him in March 2012 (and sent to his “right hand man” Mr Gregorio for approval) shows that at that point the focus of his future business was less the hospitality venues and more Mr Paparazzi.com which he planned to make the biggest celebrity destination online and on twitter.

Mr Lyons’ executive assistant in the UK, Wendy Baldock, was particularly involved in the steps needed for Mr Lyons’ move to Australia such as travel arrangements for his dog, Amber. She also entered into correspondence signing as “Executive Assistant to Darryn Lyons”. Although Mr Lyons sought to minimise her role for him and suggested that she was primarily assigned to Mr Sandford, this was not supported by the other evidence before us. We have given greater weight to the documentary evidence.

An Australian executive assistant, Ms Raby, was not appointed until September/October 2012.

Mr Lyons took most of his jewellery to Australia in October/November 2011. This amounted to some tens of thousands of pounds worth of items.

Mr Lyons arranged for various items to be shipped back to Australia, by “The British Shop Fine Art Packers and Shippers”. A quote was obtained in May 2012. The invoice was dated 26 July 2012.

Some items owned by Mr Lyons were also packed up and moved to a warehouse in Watford in the period 21-26 May 2012. These items were part of Mr Lyons’ photo archive. The packing was undertaken on 21 and 22 May 2012 and the invoice dated 29 June 2012.

Mr Lyons oversaw the packing of his personal papers in the UK in May 2012.

Mr Lyons prepared an “Unaccompanied Personal Effects Statement”, which is an Australian customs form in respect of his flight from Dubai to Melbourne, Australia that landed in Australia on 5 September 2012. Mr Lyons did not tick the box as a returning Australian resident.

Mr Lyons’ pets in the UK were a parrot (Mr P), a dog (Amber) and three polo ponies. Amber was the only animal transported to Australia.

Mr Lyons did not take Mr P to Australia as he understood that it was against the law to import exotic birds into Australia. Mr Lyons was informed that this was the position in February 2012. From December 2011, Mr Lyons had been trying to ascertain the possibility of exporting Mr P.

Mr Lyons’s dog, Amber, was jointly owned with his ex-wife, Ms Whitehead, who lived in the UK.

Wendy Baldock signed a contract with Pet Air on 25 July 2012 for Amber to be transported to Australia. Amber arrived in Australia on 22 November 2012.

The Australian quarantine requirements included blood tests six months before Amber was shipped. She could not come with him to Australia during the 2011-2012 visit as he was working on Excess Baggage and no steps had been taken to prepare her for the necessary medical tests and quarantine.

In January 2012 steps were taken to arrange Amber’s medical tests for her relocation to Australia and in February 2012 the process of shipping Amber started as recorded in an email saying that it would take 6 months.

Mr Lyons took Amber with him on his trip to France. Mr Lyons returned her to the UK on 28 August 2012, to be cared for by Ms Whitehead and Ms Friday until she could come to Australia.

Mr Lyons had two polo ponies in the UK: Silva and Fleur. They were maintained and managed by Cool Hooves Polo Ltd. Fleur was sold in September 2011 by Cool Hooves Polo Ltd. Saskia was sold to the daughter of the people running Cool Hooves in Spring 2012. Although there is some evidence suggesting that Mr Lyons owned a third polo pony he could not name it. The main evidence about the polo ponies is found in an email dated 15 January 2013 from Cool Hooves Polo Ltd. Notably, it updates Mr Lyons about ponies, including the sale of Fleur in 2011. The evidence shows that Mr Lyons had no direct involvement in the care and management of the polo ponies. They were not “pets” and at no times was there any suggestion of moving them to Australia.

Mr Lyons’ Ferrari was arranged to be shipped to Australia in October 2011. The Ferrari was a car he used mainly at weekends and was what he described as his “pride and joy”.

It was picked up for shipping on 2 November 2011. Mr Lyons confirmed that it may have been used for publicity in Australia while he was participating in Excess Baggage.

Mr Lyons used a Range Rover in the UK as an everyday car, which was leased by Big Pictures. Mr Lyons used this car for his trip to France referred to below. It had to have an MOT on the day he returned to the UK and Ms Friday returned the car to the UK, leaving Mr Lyons to fly back to Australia. Mr Lyons notified the insurers that he had given up the car on 5 September 2012.

Celebrity Holdings Pty Ltd subsequently purchased a new company car (a Range Rover) in Australia, and picked this up on 20 September 2012 in Melbourne, Australia.

Mr Lyons also had a black Jaguar and aLamborghiniin Australia.

The local council and the car insurers were not advised that Mr Lyons was leaving the UK.

Mr Lyons had at least three Barclays UK bank accounts at all relevant times. He also had at least one other UK account in his name (HSBC). The bank statements recorded his address as 86A Kensington Court.

During the year 2012-2013 Mr Lyons received income from the Monarch Film Partnership into his HSBC account.

Mr Lyons had seven UK mortgages with the Bank of Scotland and one with Halifax.

Mr Lyons had not removed himself from the electoral register by 6 April 2012.

Mr Lyons did not attend to administrative matters himself. He relied heavily on staff and advisors to carry out such tasks for him. He had little memory of which bank accounts he used when.

The evidence does not show that he cancelled his UK credit cards on or before 6 April 2012.

After Excess Baggage, in March 2012, Mr Lyons was in touch with Cathie Scott from Freemantle Media in relation to future opportunities for work.

Mr Lyons began to formulate more definite plans to return to Australia gradually from 2010. He felt that the role of paparazzi had finished as a result of social media and he wanted to see more of his parents.

Mr Lyons was elected as mayor of Geelong on 25 November 2013 and was sworn into office on 26 November 2013.

Legislation enabling the direct election of a mayor in Geelong came into force in early 2012. There was too little time after his return on 5 September 2012 for him to run in the election that year. However, he was elected Mayor of Geelong on 25 November 2013 and sworn into office on 26 November 2013.

Mr Lyons signed a sponsor agreement with Geelong Racing Club in March 2011.

In July 2011, Mr Lyons purchased a 10% share in a syndicate racehorse in Australia called 'Zimmerman'.

Mr Lyons became the Geelong Cup Ambassador in January 2012. That was a role promoting the race which took place in October 2012. Mr Lyons was therefore expected to be in Australia in order to carry out that activity, at least in the run up to the event. He would be expected to participate in radio interviews and television coverage about the cup as well as events held at locations such as shopping centres and fashion parades.

Mr Lyons had also signed a sponsor agreement with Geelong Racing Club in March 2011 for promotional reasons and in order to advertise the Elephant & Castle Hotel on the winning post.

Mr Lyons’ movements during this period were as follows:

Mr Lyons then remained in Australia for the remainder of the period, other than a nine-day trip to Dubai in November 2012.

Mr Lyons spent 38 days in the UK in 2012/13 tax year.

Mr Lyons visited France from 7 June to 28 August 2012 to say goodbye to local friends and to have a holiday. Mr Lyons has a property in St Tropez at which he stayed.

Since 5 September 2012, Mr Lyons has made three trips back to the UK.

In a press article dated 8 January 2012 it was said that Mr Lyons planned to spend much of 2012 in Australia especially with the launch of the local version of his Mr Paparazzi website, but there was no suggestion that he was planning to re-locate there permanently. We recognise though that an article in the press may not be accurate on such matters.

However, another article was sent to Mr Gregorio for his approval. Mr Gregorio was described by Mr Lyons as his oldest friend from age 12 who was his right-hand man in Australia. Given this description and Mr Gregorio’s evidence before us we are satisfied that he would have been fully aware of Mr Lyons’ plans regarding relocation to Australia. The draft of the article shows that it was prepared after meeting and speaking with Mr Lyons. It is stated that as at March 2012 Mr Lyons hoped to move back to his home in Australia later that year. It did not indicate imminent relocation to Australia.

In the autumn of 2011 Mr McMichen was giving advice to Mr Lyons about mitigation of his capital gains tax bill on sale of his UK properties on the basis that he would be UK resident at the point of sale. A Cypriot structure was proposed. There was no indication given to Mr McMichen that Mr Lyons was planning to leave the UK in the near future. For the reasons we have stated we do not accept that this was because Mr Lyons worried about confidentiality or did not understand the relevance of his residence. Although Mr Lyons did not understand the intricacies of the tax planning in the autumn of 2011 he was later aware of what he understood to be key advice after he decided to return to Australia that he should be in the UK for less than 45 days in the year 2012-2013. The advice was wrong as it failed to take into account the capital gains tax rules, but it was at least part of his motivation for travelling to France and spending time at his property in St Tropez. He even took care to ensure that when he came back from France he left for Australia on the same day so that he minimised his UK day count. He therefore had some understanding of residence sensitivities.

On moving to Australia on 5 September 2012 Mr Lyons completed an Australian customs declaration. He did not fill out the part of that declaration which related to returning residents. That would have required him to have provided further details. The completion of the declaration as Mr Lyons in fact did is consistent with him not viewing himself has having become Australian resident before his return to the UK on 29 April 2012.

However, for tax purposes Mr Lyons was advised to complete his Australian tax returns as an Australian tax resident from 1 April 2012.

An internal HMRC emails shows that as late as 16 August 2012 Mr Lyons had told HMRC that he was staying in France for 2-4 weeks dependent upon his tax advisers’ work on relocating him back to Australia and he would come to the UK to finalise things before moving to Australia permanently.

A letter signed by Mr Lyons dated 15 August 2012 to an inspector at HMRC described Mr Lyons as being in the process of permanently leaving the UK. A note of a telephone call between an HMRC inspector and an adviser at Mr Lyons’ tax advisers dated 12 November 2012 confirmed that Mr Lyons had left the country in 2012-2013. A fax dated 2 January 2013 from Mr Lyons’ tax advisors to HMRC said that Mr Lyons left the UK on 7 June 2012 noting that he spent some time in France before leaving for permanent residence in Australia.

As late as 18 February 2015 Mr Lyons’ tax advisors were writing to HMRC saying that it was during his October 2011 trip to Australia that he decided that he wanted to return there on a permanent basis, he returned to the UK 29 April 2012 to organise his affairs and prepare to leave permanently and then left permanently on 7 June 2012.

In Mr Lyons’ UK tax return for 2011-2012 there was no indication in the relevant part that he had left the UK during the year. In his UK tax return for 2012-2013 it was stated that he had ceased to be UK resident on 7 June 2012 (the date he travelled to France before relocating to Australia).

When Mr Lyons became Australian tax resident he was treated as acquiring all of his assets at market value at that time for Australian tax purposes. Therefore sales of assets (including UK properties) shortly thereafter did not attract Australian capital gains tax.

Mr Lyons filed his UK tax return for 2012/13 on 31 January 2014 (“the tax return”).

HMRC opened an enquiry under the Taxes Management Act 1970 (“TMA 1970”), section 9A into the tax return on 12 December 2014.

On 14 June 2019, HMRC issued a closure notice in respect of the tax return under TMA 1970, section 28A. The closure notice amended the tax return to include a capital gains tax liability of £1,087,413.68.

Mr Lyons appealed against the closure notice by way of letter dated 27 June 2019 (“the appeal”) and requested a statutory review.

HMRC’s statutory review conclusion letter, dated 6 September 2019, upheld the closure notice.

Mr Lyons appealed to the Tribunal by a Notice of Appeal dated 2 October 2019.

Section 2(1) TCGA 1992 (as it was at the relevant time) provides that a person is chargeable to capital gains tax in a year of assessment “during any part of which” he is resident or during which he is ordinarily resident in the UK.”

Although this may appear to be a harsh rule we have been referred to no authority limiting the plain words which can therefore result in a person being chargeable to capital gains tax simply as a result of being resident in the UK for one day in the year of assessment in which disposals for capital gains tax purposes take place.

Indeed, that is why there is the Extra Statutory Concession D2 which provides that:

“An individual who leaves the UK and is treated on departure as not resident and not ordinarily resident here is not charged to capital gains tax on gains from disposals made after the date of departure, provided that the individual was not resident and not ordinarily resident in the UK for the whole of at least four out of the seven years of assessment immediately preceding the year of assessment in which he or she left the UK.”

It is agreed by the parties that Mr Lyons cannot rely upon ESC D2 because he does not satisfy the proviso.

Reference has been made (in particular by Ms Hardy on behalf of Mr Lyons) to s9(3) and (4) TCGA 1992. That provision states (so far as relevant):

“(3)… An individual who is in the United Kingdom for some temporary purpose only and not with any view or intent to establish his residence in the United Kingdom shall be charged to capital gains tax on chargeable gains accruing in any year of assessment if and only if the individual spends (in total) at least 183 days in the United Kingdom.

(4)

the question whether for the purposes of subsection (3) above an individual is in the United Kingdom for some temporary purpose only and not with any view or intent to establish his residence there shall be decided without regard to any living accommodation available in the United Kingdom for his use.”

This is therefore a provision which could apply if Mr Lyons ceased to be UK resident prior to 6 April 2012. If so, s9(3) could be applied to his return to the UK in the period 29 April 2012 to 7 June 2012.

However, in this case HMRC have conceded that if Mr Lyons ceased to be UK resident prior to 6 April 2012 he would not be subject to capital gains tax on disposals made by him in the tax year 2012/2013.

Therefore the question before us is whether Mr Lyons ceased to be UK resident prior to 6 April 2012. If he did become non-UK resident prior to 6 April 2012 he would be non-UK resident for the whole of 2012/2013 and no charge would arise under s2(1) TCGA 1992 on disposals made by him in 2012/2013.

Section 9(1) TCGA provides that “resident” has the same meaning as in the Income Tax Acts. It is agreed by the parties that the Supreme Court decision in Gaines Cooper, and in particular the judgement of Lord Wilson, sets out the guiding principles to be applied by us in deciding whether Mr Lyons had ceased to be UK resident prior to 6 April 2012.

Lord Wilson set out the development of the common law regarding residence explaining (at [14]) that:

“an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK…the phrase “a distinct break”… is not an inapt description of the degree of change in the pattern of an individual’s life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place.”

Lord Wilson explained that a distinct break “mandates a multifactorial enquiry”. The need for “severance of social and family ties” identified by Moses LJ in the Court of Appeal pitched the requirement at too high a level, although it encompassed a substantial loosening of social and family ties.

The core issue in this case is therefore what is required for there to be “a substantial loosening of social and family ties”.

Further guidance regarding the approach to be taken in cases concerning tax residence is given by HMRC v Glyn [2016] STC 1020 (at [43]-[50]), where David Richards J summarised the relevant legal principles surrounding “residence” and “ordinary residence” by referring to the decision of Lewison J in HMRC v Grace [2009] STC 213. The principles applying to ordinary residence are not relevant to this case but those relating to residence are as follows:

Grace also approved of statements in the case of Shepherd v Revenue and Customs Comrs [2005] STC 644 which identified that:

It was established by the judgment of Viscount Sumner in Levene that a taxpayer’s tax residence should be determined on an annual basis, although it is legitimate to have regard to the taxpayer’s situation in prior and subsequent years as part of “one continuous story” (Lord Sumner in Levene at [227]).

However, we note that all of these cases must be applied with care in the context of this appeal and the application of section 2(1) TCGA 1992. In this case it is not disputed by Mr Lyons that he was UK resident in prior to 2011/12 and had been for many years. It is not disputed by HMRC that at some point in 2012/13 Mr Lyons moved his tax residence to Australia. We therefore come back to the core principle which we must apply which is to assess whether there was a substantial loosening of Mr Lyons’ UK ties before 6 April 2012.

One factor to which particular weight has been given by many of the authorities is the existence of a home in the UK. This was most notable in the case of Cooper v Cadwalader where an American, ordinarily resident in New York, rented a house and shooting rights in Scotland for about two months in each year and it was maintained available for his return at any time. The Lord President concluded that the decision of the Commissioners to allow the appeal was wrong, deciding that the taxpayer’s occupation was not of a casual or temporary character, but was substantial and as regards some of its incidents continuous (at page 105); and further relied on the fact that the taxpayer had a residence always ready for him if he should choose to come to it. This case was described as an “overwhelming” one by Rowlatt J in IRC v Zorab in confirming that the nature of a taxpayer’s connections with this country must be assessed. Cadwalader was also described by the Court of Appeal in Grace v HMRC [2009] STC 2702 as a case where only one result was possible on the facts as found.

That is not to say that availability of accommodation is somehow determinative in its own right. All of the circumstances must be considered. Therefore in Levene where the taxpayer did not have any fixed residence in the UK, but returned for about five months each year in order to obtain medical advice, visit relatives, take part in religious observances and deal with his income tax affairs, the Commissioners’ decision that he was resident in the UK was confirmed as a finding of fact being sufficiently supported by the evidence. Notably, the House of Lords in Levene described Cooper v Cadwalader as being a “comparatively simple” case in contrast to the situation where a person has no home or establishment in any country, but lives his life in hotels or at the houses of his friends and in particular where such a person spends a part only of his time in hotels in the UK and the remaining and greater part of his time in hotels abroad.

Similarly, in the case of Lysaght the House of Lords confirmed that a decision of the Special Commissioners that a taxpayer was resident in the UK where he had previously been resident in England and had left to live permanently with family in Ireland and had no definite place of abode in England, but came to England solely for business meetings every month, remaining here for about a week on each occasion, was a finding of fact sufficiently based on the evidence. It was observed by Lord Warrington that the strongest factor against the Special Commissioners’ decision was that the taxpayer’s permanent home was in Ireland.

In the case of Grace the court re-emphasised the importance of looking at all relevant factors together. That was in the context of a taxpayer who worked as an airline pilot who had bought a house in South Africa which he regarded as his home and in which he intended to retire and who came to the UK only to enable him to perform his duties as a British Airways pilot, but who had retained his house in the UK. As it was concluded that the Special Commissioners had misdirected themselves regarding the correct approach to be taken, the case was remitted (as it was not a simple case such as Cadwalader) and the balance between the evidence regarding the taxpayer’s presence in the UK using the house he had retained here as well as related factors connecting him to the UK and his connections with South Africa needed to be carried out by the fact-finding court.

Ms Hardy submitted that the evidence of Mr Lyons’ connections to and activities in Australia increasing substantially in the tax year 2011/2012 was a major component of his case that he had substantially loosened his UK ties. However, we are satisfied that this is not a zero-sum situation. A person can increase connections to, time spent in and activities in another country even to the point of becoming tax resident in that country without necessarily loosening their ties in the UK to such an extent that they cease to be UK tax resident.

The assessment of a person’s UK tax residence comes back to an overall assessment. That includes consideration of his connections to, and activities in, Australia. In doing so we note in the context of this case that clearly Mr Lyons could only devote so much time to work and business. Increased time and effort spent on interests overseas was in the context of less time spent by him on UK-based interests.

Ms Hardy also submitted that a distinction should be drawn between a significant loosening of ties and severing of ties. The Supreme Court has made clear that the latter is not required. She submitted that, for example, the marketing of Mr Lyons’ home involved a loosening of that tie. However, we do not consider that the “substantial loosening of ties” should be applied on a tie by tie basis. Instead, the case law has made clear that it is an overall evaluation of the circumstances which is required for a conclusion by us whether, as a matter of fact, Mr Lyons had substantially loosened his ties to the UK. That said, the simple act of marketing of his UK home is a factor which is at the lower end of loosening of ties.

It is recognised that Mr Lyons’ focus was shifting in late 2011 and early 2012 from the UK to Australia where he was building up business interests and preparing his home for return (by, for example, obtaining office space so that Mr Gregorio would no longer use part of his home as an office); and that is entirely consistent with his intention to return to Australia and furthermore an intention to return to Australia during the calendar year of 2012. A person’s intentions are one element of the overall assessment but are not in themselves determinative.

However, a much wider assessment of the circumstances is required in determining whether there was a substantial loosening of Mr Lyons’ ties in the UK before 6 April 2012:

At times in the presentation of Mr Lyons’ case Ms Hardy submitted that he left the UK on 30 October 2011 for tax purposes. We are clear that he did not sufficiently loosen his ties at that point. Nearly all of his ties remained in place at that point; indeed he had done little more than develop a clearer intention to relocate and put the commercial properties on the market.

Even if we treat the decline in Big Pictures Ltd’s business as a loosening of Mr Lyons’ ties in the UK by 6 April 2012, this list shows that the other most significant loosening arose from marketing of properties (including his home), and the removal of his Ferrari and jewellery to Australia. The loosening of his UK business tie in Big Pictures Ltd was set in the context of his increased focus on business activities Australia as well as the UK company and business of Mr Paparazzi.com Ltd. His home in the UK remained as the place to which he returned on 29 April 2012 and where he had accumulated so much of his personal possessions as well as much of his archive material. He continued as Chairman of Big Pictures Ltd and maintained investments such as the partnership interest and bank accounts in the UK as well as those matters connected with day to day life in a place such as doctor and dentist registrations and registration on the electoral role. His dog remained in the UK and his girlfriend was living here.

In assessing the facts as a whole we take into account that Mr Lyons had a home in Australia and was clearly building his business activities, connections and involvement in Australia from before 6 April 2012 with a view to relocating there. His focus of business interest going forward had moved from the UK to Australia prior to 6 April 2012. It was there that he saw his future.

It is relevant to take into account that Mr Lyons’ intention was to move to Australia, although we consider that the evidence overall does not show that he intended to permanently move until after 6 April 2012 because:

Overall therefore we conclude that while it is clear that Mr Lyons had set in motion various steps to enable him to relocate to Australia in 2012, those steps had not reached the point of being a “substantial loosening of ties to the UK” until after 6 April 2012. As a result Mr Lyons was UK tax resident during a part of 2012/13.

The appeal is dismissed. The assessment to capital gains tax for the year 2012/2013 issued to Mr Lyons is confirmed.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. 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.