To Be or Not To Be ... Domiciled (Part 2)

Last time we analysed the case of a pilot, Mr. Shepherd, where the commissioner decided Mr. Shepherd had left the UK only through “occasional residence abroad”, meaning he fell within s334 of ICTA 1998, which states that the commonwealth citizen whose ordinary residence is in the UK will remain taxable in the UK if they left for occasional residence abroad.

The consequence of this case was that, once again it was proved that the residence rules in the UK are far from black and white. It is not enough merely to count days in and days out; one must go further and genuinely go abroad for settled and permanent purpose. The case only suggests that the Revenue are getting a bit tougher on those who claim to be non-residents. It was something of a shock in that it went against what had previously been understood to be Revenue practice. In order to ensure that one is not a UK-resident for tax purposes, it had been usual to follow Revenue guidance, in their publication IR20, and limit return visits to less than 90 days per year. However, this case shows that reliance on this rule is not always enough.

Particularly vulnerable to attack will be those who work abroad, but who are employed directly by a UK company, especially if their families remain in the UK and they habitually return to the family home, for example working away from home during the week and returning at weekends.
Other points made by the commissioner are worth nothing:
- A reduced presence in the UK of person whose absences are caused by his employment and also are temporary absences does not necessary mean that the person is not residing in the UK

- The availabilities of living accommodation in the UK is a factor to be borne in mind in deciding if a person is resident there

- That the fact that an individual had a home elsewhere is of no consequence

- There is a difference between the case where a British subject has established a residence in the UK and then has absences from it and the case where a person has never had a residence in the UK at all

- Where there is evidence that a move abroad is a distinct break, that could be a relevant factor in treating an individual as non-resident
- That a person could become non-resident even if his intention was to mitigate tax

Time Apportionment Relief

This offers a very valuable relief against income tax for policyholders who have held an offshore life policy whilst abroad and have then returned to the UK and surrendered such a policy. The reduction assumes that the policy has never been held by offshore trustees or companies and is calculated on the following basis:
Period following as a UK resident (days)
Period policy has been in force (days)

Example: Mr. Bloggs has made a gain of ฃ100,000, has had the policy for 10 years and has been UK resident for only half this period. The gain is reduced by time apportionment relief:

1825 days x £100,000 = Gain reduced by £50,000
3650 days

If the investment was a UK life policy this relief would not be available but there should be a basic rate tax credit attaching it to a UK policy. If funds directly were held any gains would be subject to Capital Gains tax which has its own tax regime.

Summary

Following the case of the unfortunate Mr. Shepherd and also the HMRC’s publication of its proposals for the revised Residence Pages to the UK Self-Assessment tax return, there are substantial amendments which, if finalised, will necessitate a far more thorough disclosure on residence than previously required. Particularly affected will be those who fall into one or more of the following categories:

- Have a property available for use in the UK
- Perform duties of employment in the UK (includes attending ad-hoc meetings)
- Have immediate family resident in the UK
- Make many frequent visits to the UK

The clearest case should be where an individual moves abroad for full time employment which lasts for a period of at least one full tax year (6th April to the following 5th April), but even here the rules have been tightened and, as can be seen from above, all duties must now be performed overseas. Additionally, if an individual accepts a two year appointment abroad and, for understandable reasons, chooses to leave his partner and children in the UK, this would be regarded as something other than a “clear and distinct break” and non-resident status could not be assumed. Even if these factors don’t come into play, the issue of maintaining a UK property or of frequent UK visits can murky the water.

Without doubt, simply moving abroad to avoid UK tax is becoming much more difficult than it used to be, and HMRC is paying continued and careful attention to those wanting to adopt non-residence status. For anyone moving or living abroad a carefully planned strategy is vital if you want to achieve your objectives. It is critical to act sooner rather than later in this important area, to ensure that your tax planning strategy works with the changing guidelines and we would suggest an immediate review of individual circumstances in light of the new guidelines.

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]@mbmg-international.com.com

Snap Shots: by Harry Flashman

Your own time capsule

There are many time capsules buried all over the world, all with the intention that ‘sometime’ in the future, it will be dug up and our descendents will avidly study the contents, saying “Look at what they wore in 2007!” and similar. Things will be very different in 2107. (For starters, none of us reading this will still be around. In fact, will the world as we know it still be around?)

However, returning to time capsules, take a look at these two photographs, taken in 1911, of the Niagara Falls. Global warming was obviously not a problem, it was rather global freezing. These two photographs would have been very suitable for a time capsule, as they portray a condition of the world that has certainly changed since 1911. Photographically, they are also very good. Note the inclusion of the figures which give an indication of the size of the falls. I have mentioned this before, but when taking photographs of “things”, if you can incorporate a person in the photograph, you have immediately given a sense of scale to the “thing”.

Now some of you will be thinking, “Where do I get a waterfall that has frozen over in Thailand?” The simple answer is that you won’t, but there are many situations in Thailand that are likely to change by the time someone opens your time capsule in 2107.

If you think back at how your city or village looks today, compared to how it was 5, 10 or even 20 years ago, you will find there have been great differences. I remember that 30 years ago Sukhumvit Road in Bangkok was two bitumen lanes with dirt shoulders each side in the Soi 11 Ambassador Hotel area. The Ambassador itself was about three storeys high, and nothing like it is today. Now imagine what your village is going to be like in 30 years from now. “Ordinary” photographs of your local area will be a wonderful reference in another 30 years. And in 100 years will become exhibits in the local museums.

There are countless subjects that you can put in your personal time capsule, and obviously technology changes so fast that photographs of techo items should be included. Think back to the airplanes of Louis Bleriot or before that, the Wright brothers. Today’s aircraft are the Sopwith Camels of tomorrow. Wireless internet, iPods, Bluetooth, Blackberry, LCD screens - all the cutting edge of today will be the blunted edge in 100 years.

Now one important decision you have to make is the format for your photographs. Sure you can burn them onto DVDs, but will there be something you can play a DVD on in 100 years? Remember the eight track stereos, or the five and a half inch floppy disks or even Beta-Cam? Try playing one of those even today. Your DVD might be the same in 100 years. How do you download the information?

In my time capsule I will put prints, done in archival quality, and at least I know that my great grandchildren will be able to view the scenes and items and people of 100 years prior. Sometimes simplest is best.

I do encourage you to exercise your brains and think about what might be interesting in 100 years. And photograph it today.

Modern Medicine: by Dr. Iain Corness, Consultant

Your computer is killing you

Sorry about the attention grabbing headline, it’s an old journalistic trick. Your computer really won’t kill you, but sitting at your computer for hours on end, can! And backing up this contentious claim is one of the world’s respected medical publications, the New Zealand Medical Journal, with the results tabled at the annual conference of the Thoracic Society of Australia and New Zealand.

Now everyone in the world, other than a few farmers in outer Mongolia, has heard of the “Economy Class Syndrome”, in which you end up getting blood clots in the legs from being squeezed into seat 176A at the rear of the Economy section of Fright and Flight airlines. The rationale is that after sitting in 176A for the 12 hour flight to bring the bad news to Outer Mongolia, the blood flow in the legs slows so much that clotting forms and you end up with yet another acronym, this time called DVT, or more correctly Deep Vein Thrombosis, or even Deep Venous Thrombosis. This has produced a group of nervous airline passengers, cowering in fear, waiting for hijacking or DVTs.

However, Professor Richard Beasley of the Medical Research Institute in New Zealand has studied the folk admitted to hospital with DVTs and found that only 21 percent had traveled on long distance flights, whilst 34 percent were sedentary office workers who would sit in front of their computer screen for three to four hours at a stretch without getting up, and do this for up to 14 hours a day. This showed two factors. Firstly their work habit was dangerous, allowing the blood to pool up in their legs, and secondly, they had magnificent bladder control.

Whilst I was joking about the bladder control, I would postulate that to be able to sit for four hours at a time, these office workers were not drinking enough fluid, leading to thickening of the blood, and even more likelihood of blood clots. Look around your office, how many of the staff have a water jug, or even a glass of water on their work station? In my office of 12, only two of us have water on the desk.

That’s enough on the factors leading to DVT, what can a DVT do? What happens is very understandable. The clot breaks off from the deep vein and then travels upwards towards the heart. In doing so, it will go from major, large diameter blood vessels into smaller and smaller again. Eventually, depending upon the size, the clot will become wedged in a very small vessel and shut off the blood supply to that area.

If the blockage occurs in the lung, the condition is called a Pulmonary Embolism (PE). This is potentially fatal. It is estimated that each year more than 600,000 patients suffer a pulmonary embolism. PE causes or contributes to up to 200,000 deaths annually in the United States. One in every 100 patients who develop DVT dies due to pulmonary embolism.

There is some good news in all this, if pulmonary embolism can be diagnosed early and appropriate therapy started, the mortality can be reduced from approximately 30 percent to less than ten percent.

Still, 10 percent is a little too high for my liking. So what can you do to prevent getting a DVT? Apart from the obvious maintenance of good health with sensible eating and drinking and regular check-ups, the important preventive factors include getting up and walking around at least every hour (both in the office and from seat 176A), drinking plenty of water and taking 100 mg of aspirin every day. By making it less likely that a clot can form, you remove the dangers of DVT.

Go and get a glass of water now! And use it to swallow your aspirin.

Learn to Live to Learn: with Andrew Watson

Adding substance to style

Ian Hill (2002) adds substance to style when he attempts to unravel a rather complicated world by listing what amounts to necessary conditions for international education:
1. Curriculum (‘education about the world’)

• Knowledge: languages (bilingual where possible but at least a second language), global issues (including forces of good and evil), political literacy, citizenship, roots and identity

• Skills (to reconstruct the world): critical thinking, collaboration, problem-solving, adaptability, awareness of other points of view

• Attitudes (leading to action): ethical literacy, respect for cultural diversity, commitment to peace and justice, responsible citizenship, commitment to sustainable development (including the solution of global issues).

2. Intentions: pragmatic, pedagogical and idealistic

3. Derivation: from an equitable representation of the world’s best practices

4. Assessment: culturally sensitive

5. Currency: recognised around the world

6. Teaching Methodology: appropriate to the knowledge, skills, and attitudes to be developed and to students’ learning styles

7. Values: grounded in shared human values (such as empathy, respect for other points of view - see ‘attitudes’ above) and addressing cultural diversity (raising questions of ethical absolutism versus cultural relativism)

8. Context:

• A context in which international education is delivered

• A context in which the knowledge, skills, and attitudes are applied (‘for the world’).

Whilst it might be easy to concur with Hill, as he goes some way towards bridging the gap between clich้s and action, his points also illuminate the complexity of the situation. What do the theorists like Hill in their glass towers imagine happens, ‘on the ground’?

It can be strongly argued that what happens on the ground is pragmatism. The role of idealism in a global culture of immediate gratification is in many ways defined by pragmatism. As Tsolidis (2002) says, “We live in increasingly pragmatic cultures where idealism is denounced or at least pushed and pulled so that it can be jammed into frameworks established by the ‘real’.”

What Tsolidis (2002) refers to as the ‘real’ is in effect, an acknowledgement of the reality of the conditions and context in which international education exists. A realist perspective addresses education by its relation to the market. If adopting a critical realist perspective is useful in analysing the fundamentals (not so much a ‘trend’ as Tsolidis calls it) then it does not necessarily follow that the market-driven ‘reality’, increasingly evident in education, is in “stark opposition” to essential characteristics of education, which according to Tsolidis are related to the “common social good” (a platitude which remains ill-defined).

Are two such apparently bipolar perspectives reconcilable? Or are they mutually exclusive? It would be difficult to argue that both did not exist simultaneously, although such co-existence, it would appear, is by no means harmonious. So a good question might be, “to what extent does one affect the other?” Once again, I rather like Marx’s assertion that “the mode of production in material life determines the social, political and intellectual life processes in general.” (Marx, 1968 edn, p.356) Thus a society structured on capitalist principles gives rise to an educational system inevitably and by design, almost as a necessary condition, based on competition. It could reasonably be argued that pragmatism (a philosophy that evaluates assertions solely by their practical consequences and bearing on human interests) is a highly appropriate approach to take to education in the prevailing global economic circumstances.

What is the job of schools, if not to prepare students for the reality of the world outside? It could be strongly argued that it is their duty to teach students how to function in a ‘global market economy’. Here idealists such as Tsolidis are perhaps slightly blind to the possibility of acknowledging a centrist (politically) strategy which unites ideas of market with idealism, reminiscent of the politics of Blair’s (1998) ‘third way’.

If this means the model which constructs education “as a commodity to be bought in accordance with their capacity to pay” (Bridges & McLaughlin, 1996; Kleinig, 1982 in Tsolidis, 2002) then the benefits of considering this paradigm should also be acknowledged. For instance, a “consumer” would be entitled to expect increased accountability and responsibility for performance and would expect to see results improve. In this sense, it is difficult to argue against an ideology such as a capitalist market economy, which can be said to be grounded in ‘pragmatic’ realism.

Following on from this, in terms of implementing the IBO mission statement, it appears that one of the central questions is, “To what extent is ideology the product?” The growth of international schools can themselves be regarded as a pragmatic response to a market led desire.

Without resorting to cynicism, it is perhaps surprising, in light of Blair’s “Third Way” (1997) which embraced a new socio-economic reality that he took so long to acknowledge that the IBO might hold one of the keys to unlocking the door to a better future (2006). Yet interestingly, he stresses that schools, like other organisations, do not succeed because of the programme they run, but because of how they are run.

“A strong Head Teacher. Well motivated staff. Attention to the basics, but also imparting the thrill of knowledge. Discipline. Good manners and life skills. Schools succeed that have a powerful ethos, sense of purpose, pride in themselves and what they do. In this, schools are like any other institutions in public or private sector. The premium today - whether in a successful business or public service - is the ability to be creative, to adapt and adjust, to internalise external influence and practice.”

Speech at Specialist Schools and Academies Trust Conference 30 November 2006

It is useful to consider the reality of teacher’s lives ‘at the coal face’ in relation to the idealistic discourse of politicians like Delors or Blair. Teachers acknowledge that there are daily impediments to the implementation of ideology (Dunning, 1993 in Law & Glover, 2000) and one of the reasons for this (recognised by MacGilchrist et al, 1995 in Law & Glover 2000) is that staff might have little or no sense of involvement with decision making and school direction.

At best, the perceived need or response for future generations to be educated to be more “internationally minded” (Delanty, 2000) has evolved alongside the essentially pragmatic need for a child to be educated and probably, in many cases, for someone, somewhere to make some money. Thirty years on from the start of the IBO, there is little empirical evidence (Walker, 2003) to suggest that whilst the IBO may have succeeded in developing or producing individuals who embrace a ‘world view of the problems of humanity’ (Sampson and Smith, 1957 in Hayden, Thompson & Williams, 2002) that any particular good has come of it.
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Next week: The day to day minutiae