Please allow me to completely and utterly destroy any ideas that anyone may have about clarity when it comes to domicile, ordinary residence, residence and taxation as far as HMRC are concerned.
Interesting reading on these subjects of considerable complexity may be found here below. Please note that much of tax law in Britain is not based upon statute law and therefore is entirely open to interpetation and whim. This is one of the conundrums facing the new government, the stabilising of an inherently disjointed and unpredicatable tax structure.
http://www.hmrc.gov.uk/cnr/hmrc6.pdf
Since the inception of the application of self assessment, HMRC will not rule on residency. HMRC may inform a tax payer who is not resident in the UK, that he no longer is required to complete a UK tax return, but this is not the same as the previous system under which a letter would be send to the tax payer by HMRC confirming his non residence.
Any doubts as to the sensibleness of this policy from the point of view of HMRC will be rapidly dispelled by a reading of the recent appeal court case of Gaines-Coooper v HMRC, a case which Gaines Cooper lost.
It is interesting to those who have studied the above case to note that Gaines-Cooper had apparently not applied to HMRC for a change of domicile of origin. At the moment however, HMRC seems quite content to allow questions of domicile to remain unanswered, presumably awaiting some form of statutory guidance from the present government as to both domicile and a residence test. Up until very recently however, a change of domicile of origin was a matter which had to be agreed between tax payer and HMRC.
In the case of South Africa, the tests of ordinary residence and residence apply, much as they do in the UK. Cohen v CIR and Kuttel v CIR will provide further information on the interpetation of ordinary residence for those who are seriously interested.
The internal revenue systems of both the United Kingdom and South Africa take various forms of expenses and deductions in to account when it comes to the calculation of individual income tax returns. These would be matters which would have to be declared to and agreed with the internal revenues of the countrys concerned. The compliance divisions of both country's internal revenue departments are in close communication and are, to the best of their abilities, quite efficient.
Each case of domicile, ordinary residence and residence is taken on an individual basis and circumstances which might hold for one determination in one case will not necessarily achieve the same result in another. In the event of any doubt at all on the part of a sensible tax payer, a professional adviser should be consulted. The concept of a statute of limitations in Britain and South Africa is not well developed. This helps to explain why Mr Gaines-Cooper may find himself liable for taxes ranging back over a period of some twenty five years, totalling £30 million, even though no fraud was alleged or commited. If cabin or flight crew have been mismanaging their tax affairs or declaring incorrectly on their self assessment returns then retribution might attend their efforts with, at the least, penalties and interest. It must be that the attention of HMRC has been drawn to the salary and benefit structure of the emolluments of cabin crew, and, by extension, flight crew. I would expect there to have been a compliance section established at HMRC to deal with this.
All however is not entirely gloom. In the case of this BA pilot, he won his suit.
http://www.tax.org.uk/attach.pl/6697...35_TA_0408.pdf
However, it is worth noting that the results of this case will almost certainly have found their way, through the usual compliance channels, to the desk of another, more southerly situated, internal revenue service.
Please take note that the function of a reciprocal tax treaty is not to allow a person to avoid tax or to enable him to pay less tax. The purpose is to ensure at least that the tax payer is not taxed twice over. The tax treaty between the US (where tax is generally lower than the UK) and the UK provides that tax on dividends but not income is witheld at 15% concession in the United States, provided and only provided, that any income afforded such a benefit will then be imported in to the UK and declared to HMRC for taxation in the UK. At that point, the tax already paid in the US may be taken into account in the calculation of actual UK tax liability.
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