A Taxpayer v The Commissioners for HMRC

Under paragraph 22(4) of Schedule 45 to the Finance Act 2013, the exception to counting a day in the UK is a composite test. The circumstances must be exceptional, beyond the taxpayer’s control, causative of the taxpayer’s presence, such as to prevent departure, and accompanied by an intention to leave as soon as permitted. “Prevent” is not confined to legal or physical restraint. A sufficiently compelling moral or conscientious obligation may form part of the circumstances. Whether the circumstances as a whole are exceptional and objectively compelling is for the First-tier Tribunal. Whether found facts meet the ordinary meaning of “exceptional” is a question of fact. The Upper Tribunal may intervene only for an error of law, including where the true and only reasonable conclusion contradicts the FTT’s determination.

The taxpayer moved from the United Kingdom to Ireland and claimed non-residence for the 2015/16 tax year. She was present in the UK at the end of 50 days, but argued that six days should be disregarded under paragraph 22(4) of Schedule 45 to the Finance Act 2013, because she had remained to care for her twin sister and the sister’s minor children during a serious family crisis.

The First-tier Tribunal allowed her appeal at [2022] UKFTT 133 (TC). The Upper Tribunal allowed HMRC’s appeal, set aside that decision and re-made the decision in HMRC’s favour at [2023] UKUT 00182 (TCC). The central issues were the meaning of “prevent”, the relevance of moral obligations, the legal or factual character of “exceptional”, and whether the statutory conditions were satisfied on each day.

1. Disposition. The appeal was allowed and the First-tier Tribunal’s decision was restored. The Court held that the Upper Tribunal had applied an unduly narrow approach to paragraph 22(4) of Schedule 45 to the Finance Act 2013.
2. Prevention and moral obligations. “Prevent” is an ordinary word, stronger than “hinder”. It refers to stopping departure or making it practically impossible, rather than merely making departure inconvenient or difficult. The concept is not confined to legal duties, physical impossibility or medical advice. A sufficiently compelling moral or conscientious obligation may prevent a person leaving the UK. The FTT must assess whether the circumstances were objectively compelling, taking account of both the objective facts and the taxpayer’s reaction to them. A merely subjective or idiosyncratic belief is insufficient.
3. Composite statutory test. The words “exceptional circumstances beyond P’s control that prevent P from leaving the UK” must be read as a whole. The FTT must consider all relevant circumstances together, including the illness of a close relative and any moral or societal obligation arising from it. Those matters may collectively be sufficiently compelling to prevent departure and may constitute exceptional circumstances. “Exceptional” has its ordinary meaning: unusual, special or uncommon, though it need not be unique or very rare. The statutory examples inform the construction of the phrase.
4. Law and fact. The meaning of paragraph 22(4) is a question of statutory construction. Whether found facts fall within the ordinary meaning of “exceptional circumstances” is, however, an evaluative question of fact. Applying Cozens v Brutus [1973] AC 854, Moyna [2003] UKHL 44 and Edwards v Bairstow [1956] AC 14, the Upper Tribunal could intervene only for an error of law, including where the true and only reasonable conclusion contradicted the FTT’s decision.
5. Application. The FTT’s findings were capable of being read coherently. Its distinction between alcoholism and the exceptional circumstances created by the immediate need to care for neglected minor children was rational. There was sufficient evidence for the FTT to conclude that the need to stabilise the household continued until the taxpayer left on each occasion. Although paragraph 22(4) applies to each day, separate detailed consideration of every day is not always necessary where the same circumstances plainly continue. It is usually helpful to consider what changed when the taxpayer eventually left.

• Court of Appeal (Civil Division) allowed the taxpayer’s appeal and restored the First-tier Tribunal’s decision.
• Upper Tribunal (Tax and Chancery Chamber) at [2023] UKUT 00182 (TCC) allowed HMRC’s appeal, set aside the FTT’s decision and re-made the decision in HMRC’s favour.
• First-tier Tribunal at [2022] UKFTT 133 (TC) allowed the taxpayer’s appeal, finding that the six disputed days fell within paragraph 22(4).