Readers may remember the UK residency case of Lyle Dicker Grace.
Mr Grace is a pilot with British Airways. He has a house in Horley in the UK, primarily to be near to Gatwick Airport as his place of work is either from Gatwick or Heathrow Airports.

When he took control of BA's large jets he would be out of the UK on work for days on end. After he got divorced in 1997 he purchased a house at the Strand near Cape Town. Mr Grace had family in South Africa, and friends in Cape Town. He had a BMW motor car and a Cessna private plane in South Africa. In the complex where he lived, his neighbours lived permanently - it was not a cluster of holiday homes. However he had kept the house at Horley, which was fully furnished and he retained vacant possession. He remained on the electoral roll at Horley.

Mr Grace had appealed against a determination by HM Revenue & Customs (HMRC) that he was ordinarily resident in the UK for income tax purposes. This matter came before Dr Nuala Brice as Special Commissioner and she decided that he was neither resident nor ordinarily resident in the UK. HMRC appealed this decision, which came before Lewison J in the Chancery Division. His conclusion was that the Special Commissioner had erred, and that Mr Grace was resident in the UK, and the parties had agreed that if he was resident then he was ordinarily resident in the UK too.

Mr Grace took this decision to the Court of Appeal. Lloyd LJ gave the unanimous decision of the Court that while the Special Commissioner had misdirected herself; the Court did not agree with Lewison J that there was only one possible conclusion to the question of residence based on the primary facts as found before the Special Commissioner.

The Court of Appeal remitted the matter to the First Tier Tribunal (Tax Chamber) which in the reform of the English courts had by then replaced the Special Commissioners. So the matter came to be heard again before Barbara Mosedale as
Tribunal Judge. This is one of the UK's very important residence cases as HMRC has sought to enforce Her Majesty's taxing powers.

Judgment was issued on 5 January 2011. The point argued by Ingrid Simler QC for HMRC was that residence has an adhesive nature, namely that it is harder for a person who has been a resident to shake off residency than it is for a person who has not been a resident to show that they have not acquired residence. The Tribunal
Judge found that Mr Grace would need to show a sufficient break in the pattern of his life to convert his residency status to non-residence. The judgment considers an impressive array of evidence, some freshly admitted in the re-hearing.

The finding was that Mr Grace is resident in both the UK and South Africa. Mr Grace considers himself resident in South Africa. He spends about equal amounts of time in both jurisdictions. When he was in the UK he was staying at his house at Horley, where he had a settled abode. His presence in the UK was indefinite as that was where his employment was - and employment was a matter of choice. The occupation of his own house gave a different quality to his time in the UK than if he had stayed in hotels. The Tribunal Judge thought how he spent his leisure time to be of less significance.

He had failed to demonstrate a sufficient break with the United Kingdom.

Written by Alastair Morphet, Director, Tax Practice, Cliffe Dekker Hofmeyr