Revenue & Customs v Grace [2008] EWHC 2708 (Ch)

[2008] EWHC 2708 (Ch)Case No CH/2008/APP/0195
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 11 November 2008
Before
THE HONOURABLE MR. JUSTICE LEWISON
Between
THE COMMISSIONERS FORAppellantsHER MAJESTY’S REVENUE & CUSTOMSAppellantLYLE DICKER GRACERespondent
Ms. Ingrid Simler QC and Mr. Akash Nawbatt (instructed by HMRC) for Appellants.Mr. Keith M. Gordon (instructed by Sharpe Pritchard) for Respondent.Hearing Hearing dates: 4 th November 2008
Judgment

Mr. Justice Lewison:

[1]Mr Lyle Grace is an airline pilot who works for British Airways. He pilots long haul flights between the United Kingdom (from either Gatwick or Heathrow) to South Africa and elsewhere. He has a home in Cape Town. He was assessed to income tax under section 19 (1) of the Income and Corporation Taxes Act 1988 (“the Act”) for the years 1997/8 to 2002/3 on the ground that during those years he was resident and ordinarily resident in the United Kingdom. He appealed against that assessment. On 29 January 2008 the Special Commissioner (Dr Nuala Brice) allowed his appeal. The Special Commissioner held that Mr Grace was neither resident nor ordinarily resident in the United Kingdom during the years of assessment. She held also that Mr Grace was entitled to the benefit of section 336 of the Act. HMRC now appeal. The appeal is limited to questions of law. It is common ground that whether a person is resident or not is a question of fact. In addition it is common ground on the facts of this case that the Special Commissioner’s decision on the questions of residence and ordinary residence stand or fall together. However, HMRC say that the Special Commissioner misdirected herself; and also that when one considers how she applied the principles that she said she had derived from the cases, the only possible conclusion is that she must have made a hidden error of law.

The legal framework

[2]Section 19 of the Act provides, so far as material:
“19(1) The Schedule referred to as Schedule E is as follows: SCHEDULE E 1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which fall under one or more of the following Cases- … Case I any emoluments for any year of assessment in which the person holding the office or employment is resident and ordinarily resident in the United Kingdom … Case III any emoluments for any year of assessment in which the person holding the office or employment is resident in the United Kingdom (whether or not ordinarily resident there) so far as the emoluments are received in the United Kingdom.”

SCHEDULE E

[3]There was considerable agreement about the law between Ms Simler QC, appearing with Mr Nawbatt for HMRC, and Mr Gordon appearing for Mr Grace. For the moment it can, I think, be sufficiently summarised for the purposes of this case 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.[4]These principles were conveniently described in argument as the common law of residence and ordinary residence. But in addition to the common law there are two specific statutory provisions dealing with residence which bear on a person’s liability to pay tax.[5]Section 334 of the Act provides so far as material:
“Every Commonwealth citizen or citizen of the Republic of Ireland- (a) shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad; and (b) shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains, whether they arise from property in the United Kingdom or elsewhere, or from any … employment … in the United Kingdom or elsewhere.”
[6]In order for section 334 to apply a number of conditions must be fulfilled. First, the person in question must be a Commonwealth citizen or citizen of the Republic of Ireland. Second, that person must once have had his ordinary residence in the United Kingdom. Third, he must have left the United Kingdom. Fourth, if he has left the United Kingdom, he must have left it for the sole purpose of occasional residence abroad. It follows that if a person has not “left” the United Kingdom at all, section 334 will not apply to him. Where the cases consider whether there has been a “distinct break” in the taxpayer’s life (e.g. Re Combe (1932) 17 TC 405 and Reed v Clark (1985) 58 TC 528, 556) they have done so in considering the fourth of these conditions. It may be, however, that at least in a case in which the taxpayer is physically present in the United Kingdom for part of the year of assessment, the question really arises in considering the third of the conditions; i.e. whether the taxpayer has “left” the United Kingdom at all. It was common ground that section 334 did not assist HMRC either because (according to HMRC) the section did not apply because Mr Grace never “left” the United Kingdom; or because (according to Mr Gordon) although Mr Grace did leave the United Kingdom he did not do so for the sole purpose of occasional residence abroad. Ms Simler accepted that if Mr Grace had left the United Kingdom by reason of having set up home in Cape Town, he had left for more than occasional residence abroad. I need not, therefore, consider it further.[7]Section 336 provides, so far as material, as follows:
“(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”
[8]Mr Gordon says that section 336 provides an exemption for a taxpayer if he would otherwise be held to be resident in the United Kingdom. Thus even if (contrary to the Special Commissioner’s decision) Mr Grace cannot take advantage of section 336, HMRC would still have to establish that he was resident in the United Kingdom on common law grounds (or by virtue of section 334). In my judgment he is right. If a person is in the United Kingdom for a temporary purpose, then section 336 operates as a deeming provision. If he has not spent six months in aggregate in the United Kingdom he must be treated as non-resident. Conversely if he has spent six months here then he must be treated as resident. Accordingly if Mr Grace was not here for some temporary purpose, then the deeming provision would not come into play and section 336 would not apply to him at all. In that event section 336 would not help him to avoid the conclusion that he was resident in the United Kingdom. But conversely if section 336 did not apply to him then that section cannot help HMRC establish that he was resident. That must still be done either because he was resident on common law grounds, or because he is liable to tax under section 334.[9]Mr Gordon rightly reminded me that the court is very reluctant to interfere with the decision of a specialist tribunal such as the Special Commissioner; and can only do so if the Special Commissioner has made a mistake of law. There are many cases in which judges have expressed doubt about a decision on the facts (either by the General Commissioners or a Special Commissioner), or have even said that they would have come to a different conclusion, but yet have been unable to intervene. I bear that firmly in mind.

The Special Commissioner’s decision

[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.[15]The Special Commissioner then turned to examine two day counts: one produced by Mr Grace and the other by HMRC. Not surprisingly the day count prepared by HMRC was less favourable to Mr Grace than the day count that he produced himself. This was not because of any inaccuracy in the figures; but was attributable to the basis on which the figures were compiled. HMRC’s figures included the days of arrival and departure in the United Kingdom, and the days when the Appellant was sick in the United Kingdom, and the days when the Appellant arrived and left the United Kingdom on the same day, and did not show as days in Cape Town days spent in flight to and from Cape Town. On that basis in 1997/1998 Mr Grace had 86 days attributed to the United Kingdom and 81 days attributed to Cape Town; in 1998/1999 146 days attributed to the United Kingdom and 103 days attributed to Cape Town; and in 1999/2000 139 days attributed to the United Kingdom and 109 days attributed to Cape Town. Mr Grace’s figures, on the other hand, did not include days of arrival in, or departure from, the United Kingdom but did include days of arrival in, and departure from, Cape Town. Nor did they include days when he was in the United Kingdom but sick; nor days when he arrived in and left the United Kingdom on the same day. On that basis Mr Grace attributed 41 days to the United Kingdom and 91 to Cape Town in 1997/8; 71 days to the United Kingdom and 110 to Cape Town in 1998/9; and 70 days to the United Kingdom and 130 to Cape Town in 1999/2000.[16]Mr Grace’s evidence (which I think the Special Commissioner accepted) was that during the six years in issue there were only three occasions when he had spent more than seven consecutive days in the UK; while there were 60 such occasions in which he had spent more than seven consecutive days in Cape Town.[17]The Special Commissioner expressed her conclusion on the day count as follows (§ 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.”
[18]Having set out the rival arguments, the Special Commissioner explained her reasons for decision. She first considered whether Mr Grace was resident in the United Kingdom. She began her consideration of this question by referring to Re Young (1875) 1 TC 57. That was the case of a master mariner who had a house in Glasgow, where his wife and children lived, but who spent most of his days at sea. He was held to have been resident in the United Kingdom despite his absences at sea. The Special Commissioner said (§31):
“However, the facts in Young can be distinguished from the facts in the present appeal because in Young the taxpayer had only one residence, which was in Glasgow, and all his absences were for the purpose of his trade. In this appeal, in the relevant years of assessment, the Appellant had a residence in South Africa where he spent his time when he was not performing the duties of his employment.”
[19]Having reviewed the authorities she derived from them the principle which she described as follows (§ 36):
“These authorities establish the principle that, in considering whether a person is resident, one has to consider all the facts of the case. The relevant facts include not only the time that a person is in the United Kingdom but the nature of his presence and his connection with this country. A “mere traveller”, who might spend a considerable period in the United Kingdom each year, is not necessarily resident here.”
[20]No criticism is levelled at this statement of the principle, although the case of a “mere traveller” was irrelevant to Mr Grace’s situation. She then said (§ 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.”
[21]At this stage of her reasoning, the Special Commissioner was not deciding that Mr Grace was not resident in the UK. She was deciding that he was not necessarily resident. HMRC do not criticise this part of her decision, save in one respect. They say that by referring to the reason for Mr Grace’s presence in the United Kingdom as “only” because his employment required him to be there, she failed to appreciate that presence in the United Kingdom because of the requirements of one’s job counted as a “settled purpose”, rather than as a “temporary purpose”.[22]The Special Commissioner then turned to consider authority on the meaning of reside and directed herself that it meant “to dwell permanently or for a considerable time”. She took this from the speech of Viscount Cave in Levene, part of which she quoted in paragraph 38 of her decision. The part of his speech which she quoted was:
“In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure. … But a man may reside in more than one place. Just as a man may have two homes – one in London and the other in the country – so he may have a home abroad and a home in the United Kingdom, and in that case he is held to reside in both places and to be chargeable to tax in this country.”
[23]Thus the Special Commissioner clearly directed herself that a person can have more than one residence.[24]However, she then said in paragraph 40:
“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.”
[25]HMRC’s principal complaint is that in this paragraph the Special Commissioner failed to apply the principle that she had just articulated.[26]The Special Commissioner then turned to consider the case of a person who had once been resident and ordinarily resident in the United Kingdom but claimed to have ceased to reside. Her consideration of that situation was necessary because of her finding that the Horley house had been Mr Grace’s principal residence until 1997. From the authorities she derived the principle (§ 42) that:
“…if a person resident in the United Kingdom leaves for another country, and if there is a "distinct break", then even if he returns here for lengthy visits, he need not be resident here if he has a settled mode of life elsewhere.”
[27]She continued in the same paragraph:
“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.”
[28]The Special Commissioner moved on to consider whether Mr Grace was ordinarily resident in the United Kingdom during the years of assessment and concluded that he was not. The final part of the Special Commissioner’s decision concerned the application of sections 334 and 336 of the 1988 Act.[29]It was common ground that Mr Grace was a Commonwealth citizen. Since the Special Commissioner had found that Mr Grace’s ordinary residence was in the United Kingdom between 1990 and 1997, the question arising under section 334 was whether he had left the United Kingdom for the purpose only of occasional residence abroad. The Special Commissioner concluded (§ 55):
“However, in my view his presence abroad after that date was not for the purpose only of occasional residence abroad but for the purposes of continuous and settled residence in his house in Cape Town punctuated only by the need to visit the United Kingdom for the purposes of his work.”
[30]The Special Commissioner then turned to section 336.[31]The Special Commissioner’s conclusion on section 336 was as follows (§ 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.”
[32]The Special Commissioner summarised her conclusions in paragraph 60 of her decision as follows:
“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.”

HMRC’s criticisms of the Special Commissioner’s decision

[33]In a nutshell, Ms Simler says that the Special Commissioner misunderstood the nature of a “temporary purpose” both in the context of section 336 and more widely. She treated presence in the United Kingdom in fulfilment of duties to be performed under a permanent (or at least indefinite) contract of employment as amounting to a temporary purpose. That error of law led the Special Commissioner to discount the importance of Mr Grace’s employment in considering whether he was resident or ordinarily resident in the United Kingdom during the years of assessment. Although the Special Commissioner dealt with temporary purposes explicitly towards the end of her decision in her consideration of section 336 (in which the phrase appears), her error of law “infected” her whole approach.[34]Ms Simler relies in particular on Cooper v Cadwalader (1904) 5 TC 101; and a judgment of mine in Shepherd v Commissioners of Inland Revenue [2006] STC 1821, in which I upheld a decision by the same Special Commissioner that Captain Shepherd (who was also an airline pilot) was resident for tax purposes. It is fair to say that there are striking factual similarities between Captain Shepherd’s case and this one.[35]In Cooper v Cadwalader an American citizen took a lease of a house and shooting rights in Scotland, and he spent two months continuously in that house exercising those shooting rights in each year. He travelled with his valet, and the house was staffed while he was there, and available for him while he was not. Lord McLaren said:
“I think for the purposes of the present case the first point in the exempting clause is quite sufficient, because I don't think that Mr. Cadwalader is in a position to affirm, when he comes year after year during the currency of his lease to spend the shooting season in Scotland, that he is here for a temporary purpose only. I don't mean that you might not frame a definition which would bring this within the scope of temporary purposes, but taking the ordinary meaning of the word, I should say that temporary purposes means casual purposes as distinguished from the case of a person who is here in the pursuance of his regular habits of life. Temporary purpose means the opposite of continuous and permanent residence. Nobody ever supposed that you must reside twelve months in the year in order to be liable for Income Tax, and therefore “temporary” does not mean the negation of perpetuity, but means that it is casual or transitory residence, as distinguished from a residence, of which there may be more than one, but which may be habitual or permanent.”
[36]In Shepherd I said that this was general guidance which could be applied to section 336. I remain of that view. However, what is important is that the adjective “temporary” in section 336 is not descriptive of the taxpayer’s presence. That is dealt with by the deeming provision which requires the aggregation of the time spent in the UK during the year of assessment. Rather, the adjective “temporary” is descriptive of the taxpayer’s purpose: that is to say the reason why he is in the United Kingdom. So the question for the Special Commissioner was whether the reason for Mr Grace’s presence in the United Kingdom was casual or transitory. 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. While not formally conceding this point, Mr Gordon did not strenuously argue that the Special Commissioner was right. In my judgment therefore, the Special Commissioner’s decision on this point is not one that was available to her on the facts that she found. Section 336 did not therefore assist Mr Grace. However, as I have said, if section 336 does not apply, because Mr Grace does not fulfil the condition on which it depends, it cannot help HMRC either.[37]In addition Ms Simler says that, notably in paragraph 40 of her decision, the Special Commissioner has assumed that a person can only have one permanent residence; and that the Special Commissioner has decided that because Mr Grace has a permanent residence in Cape Town it follows that he cannot have a permanent residence in the United Kingdom. That she says is another error of law. An alternative way of putting this point is that the Special Commissioner tacitly embarked on a search for Mr Grace’s “real home” or “principal home” which is not the appropriate search. For convenience I repeat the relevant parts of paragraph 40:
“… 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.” (Emphasis added)
[38]The natural reading of the first sentence is that the Special Commissioner decided that because (“as”) Mr Grace’s permanent residence was in South Africa he could not have had a permanent residence in the United Kingdom. Likewise the natural reading of the second sentence is that the Special Commissioner decided that because (“as”) Mr Grace’s settled or usual abode was in South Africa he could not have had a settled or usual abode in the United Kingdom. Thus read, it seems inescapable that the Special Commissioner proceeded on the basis that a person cannot have more than one permanent residence or more than one settled and usual abode. Mr Gordon agreed that this paragraph of the Special Commissioner’s decision was, as he put it, “unfortunately worded” but he submitted that because only two paragraphs earlier in her decision the Special Commissioner had quoted the speech of Viscount Cave in Levene in which he said clearly that a person could have more than one residence, it could not be supposed that the Special Commissioner had applied a test at variance with that quotation. The phraseology must have been no more than a slip of the keyboard. Moreover he relied on the concluding sentence of paragraph 40 in which the Special Commissioner said that the Horley house was not in the nature of “a” home (which admitted the possibility of there being more than one home), so that there was a finding of fact that the Horley house was not a home at all. This, he submitted, was a case of occupation which did not mature into residence.[39]Attractively though these submissions were put, I cannot accept them. So far as the first is concerned, although the Special Commissioner had quoted the speech of Viscount Cave, the way in which she expressed her decision is at variance with it. Moreover, paragraph 40 is not an isolated occasion. The ground on which she distinguished Re Young (§ 31) was that whereas Mr Young had only one residence which was in Glasgow, Mr Grace had a residence in South Africa. This could only have been a relevant ground of distinction if either a taxpayer could have only one residence or a taxpayer could have only one real home. She carried the same thought process as she expressed in paragraph 40 into her summary of conclusions in paragraph 60 in which she said that after 1997 the United Kingdom “was not where he dwelt permanently nor where he had his settled or usual abode which was in South Africa.” Again this sentence uses a process of elimination: viz. that because Mr Grace had a permanent dwelling and settled place of abode in South Africa he could not have had one in the United Kingdom. I am driven to the conclusion that the Special Commissioner applied the wrong legal test.[40]So far as the second point is concerned the Special Commissioner’s statement that the Horley house was not “a home” is a conclusion rather than a finding of primary fact. As Ms Simler submitted there is no test of “homeliness”. The primary facts found by the Special Commissioner were that the Horley house was Mr Grace’s principal residence from 1990 to 1997 (§ 9); it remained fully furnished (§ 14); it was available to Mr Grace throughout the year because it was not let out and Mr Grace retained vacant possession of it (§ 14); and he received post there (§ 14); Mr Grace spent two or three days there before or after each flight (§ 23); and in aggregate Mr Grace spent somewhere between 40 and 146 days a year there (§18 and 20). Why, then, did the Special Commissioner conclude that it was not “a home”? The only explicit reason she gave was that the Horley house was “a substitute for hotels” (§ 40). But as Viscount Cave explained in Levene, and as Mr Lysaght found to his cost, living in a hotel or a series of hotels can amount to residence, particularly if (as in Lysaght) the stays in hotels are attributable to a continuous business obligation and the sequence of visits excludes the elements of chance and of occasion. Mr Grace’s stays in the Horley house were attributable to performance of his employment duties; and they were regular and predictable. Moreover, unlike a hotel room, the Horley house actually belonged to him; and unlike a hotel room no one else used it. In my judgment the explicit reason that the Special Commissioner gave cannot be sustained.[41]Some further clues to the Special Commissioner’s thinking can be found in other parts of her decision; and it is here that Ms Simler’s point about the “infection” of her thinking by her error in relation to section 336 comes into play. Ms Simler submits that her conclusion that Mr Grace’s duties under his contract of employment were only temporary and occasional (§ 58) led her to discount that factor beyond what was legally permissible. Thus the Special Commissioner said that Mr Grace “only visited the United Kingdom because his long haul flights started and ended there” (§ 37); that during the relevant years of assessment he left Cape Town “for business purposes only” (§ 40); that since 1997 he has returned to the United Kingdom “but only for the purposes of his employment” (§ 42); that his residence in Cape Town was punctuated “only by the need to visit the United Kingdom for the purposes of his work” (§ 54); and that his presence in the United Kingdom in order to do his work was presence “for temporary and occasional purposes only” (§ 58). The repeated use of the word “only” indicates that the Special Commissioner overlooked the principle that a person’s residence may be dictated by the exigencies of work. This does not make it in any sense involuntary. After all, the fact that Mr Grace works as a pilot for British Airways (which in turn requires him to work on flights originating and terminating in the United Kingdom) is entirely his choice. I agree with this submission. In my judgment the Special Commissioner was wrong in law to discount the reason for Mr Grace’s regular presence in the United Kingdom in his own house as being attributable “only” to his work. She referred also in the summary of her reasons for deciding that Mr Grace was not resident to “the temporary nature of his ties with this country” (§60), which must have been a reference to his ties by reason of his employment. I agree, therefore, with Ms Simler that the Special Commissioner’s error about the meaning of “temporary purpose” fed in to her ultimate conclusion on the question whether Mr Grace was resident in the United Kingdom.[42]Ms Simler submitted also that the Special Commissioner was wrong in concluding that there had been a “distinct break” in Mr Grace’s life when he set up home in Cape Town. The Special Commissioner’s conclusion, she said, was inconsistent with the undisputed facts that Mr Grace retained the Horley house which remained furnished; continued the same employment both before and after the supposed distinct break, and continued to be present regularly in the United Kingdom for the purposes of that employment in the very same house that had been his only home. Before he set up home in Cape Town he had a home in the United Kingdom. All that happened thereafter was that he acquired another home in Cape Town. From being a man who resided in one place, he became a man who resided in two.[43]The phrase “distinct break” does not feature in the Act. What it means is not therefore a question of statutory construction. It is an idea that has been developed in the application of section 334 and its predecessors, which requires determination of the questions whether the taxpayer has “left” the United Kingdom and, if he has, whether he has left for “occasional residence” abroad. 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”. But I do not rest my decision on that ground.[44]In my judgment Ms Simler has shown that the Special Commissioner made errors of law in arriving at her decision that Mr Grace was not resident in the United Kingdom during the relevant years of assessment. The only possible conclusion from the primary facts found was that he was. It was common ground that if he was resident, he was also ordinarily resident during those years. I will therefore allow the appeal.[45]If it is of any consolation to the Special Commissioner, her summary of the law in paragraph 58 of her decision in Shepherd and her conclusions on the facts in that case in paragraph 63 are, in my view impeccable; and represent the correct approach to be adopted.

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