There are factors that guide the courts in determining the residence of a taxpayer among different jurisdictions. They are:
i. Physical Presence
The general principle of taxation is that tax being a compulsory contribution to the state for it to perform its social responsibilities; it is only persons who benefit from the provision of such social amenities that should make the contribution. It is for this reason that physical presence within a given tax jurisdiction brings the taxpayer under that tax jurisdiction because of the simple reason that he enjoys directly the benefits of the social amenities provided by the government. In Turnbull v. Foster406 the court held that absence for a whole year brings United Kingdom residence to an end and that a more positive case is needed to prove its resumption then is required where there has been no full year‟s absence.
404A B Ahmed, op. cit. pg. 100.
405 (1904) STC 101.
406 (1904) 6 T.C. 206.
134 ii. Family and Business Ties with the Tax Jurisdiction
The question of family ties is usually an important factor in deciding whether a person has given up residence from a given tax jurisdiction.407 In Rogers v. IRC408 it was held that a master mariner who had been physically absent from the United Kingdom throughout the year of assessment but who hold a house in which his wife and family lived during his absence was nevertheless resident. In Brown v. IRC,409 it was held that Mr. Brown had four sons living in the United Kingdom, two of them were married and he visited the United Kingdom each year to see “relations”, presumably including his sons can ordinarily be said to be resident in the United Kingdom for tax purposes.
Again, related to family ties is business interest, for instance, the existence of a bank account within the tax jurisdiction and membership of a club indicating as both may do, a continuing association with the tax jurisdiction and an intention to return there, serve as very strong factors in leading the tax administrators conclusion that the taxpayer is ordinarily resident within the tax jurisdiction.410 In IRC v. Zorab411 where Mr. Zorab an Indian civil servant born in India and lived there all his life until 1920 when he retired and had to spend his life travelling and visiting friends. He had no business interests here and had no intention of setting up a permanent home, but he spent five or six months in each year in the United Kingdom. It was held that he was merely a visitor.
iii. Nationality
Nationality is not a strong factor in establishing residence. It is true that residence does not depend on nationality but it nevertheless, a commonsense to tax administrators that where an individual is a citizen, either by birth or has adopted it, he is less likely to abandon his
407 A B Ahmed, Residence and Permanent Establishment Issues, op cit p. 102.
408 (1879) I.T.C. 225.
409 (1926) 11 T.C. 292
410 A B Ahmed, Residence and Permanent Establishment Issues op. cit pg. 103
411 (1926) 11 TC 289
135 residence there than a person who is not a citizen and may therefore reasonably be supposed always to have been a visitor. In Leven v. IRC412 Lord Cave said:
The most difficult case is that of a wonderer who having no home in any country, spends a part only of his time in hotels in the United Kingdom and the remaining and greater part of his time in hotels in abroad…. If such a man is a foreigner who has never resided in this country there may be great difficulty in holding that he is resident here. But if he is a British subject the commissioners are entitled to take into account all the facts of the case including facts such as those referred to….
Upon the facts of his past and present habits of life, it would be difficult to determine his tax liability.
iv. Past History as to Residence
It is generally accepted that where a taxpayer is a citizen of the tax jurisdiction and his ordinary residence within that jurisdiction, he will be liable to income tax notwithstanding that he is temporarily resident abroad. The only controversy here is that ordinary residence is something different from residence and it is probably easier to be ordinarily resident than merely resident. This was the issue in Miesegaes v. IRC413 where it was held that it is necessary to first determine residence before considering the question of ordinary residence.
In Leven’s case,414 the taxpayer had retired from business in England and lived for several years in London, having thus been for the whole of his life both resident and ordinary resident in the United Kingdom. For a time after his retirement he had no place of abode in the United Kingdom and lived at hotels either in United Kingdom or abroad. He spent four or
412 (1928) 13 TC 488 at 506
413(1957) 37 TC 493.
414 (supra).
136 five months in each year in the United Kingdom for the purpose of obtaining medical advice, visiting relatives and the graves of his parents and taking part in certain Jewish religious observances. He was held to have left the United Kingdom on his visit abroad for the purpose of occasional residence only, notwithstanding that they constituted the greater part of the year. The House of Lords held that the Commissioners were correct in taking into account with regard to the years of assessment conduct which occurred subsequently. Lord Summer said:
Light may be thrown on the purpose with which the first departure from the United Kingdom took place by looking at his proceedings in a series of subsequent years. They go to show method and system and so remove doubt which might be entertained if the years were examined in isolation from one another. The evidence as a whole disclosed that Mr. Levene continued to go to and fro during the years in question, leaving at the beginning of winter and coming back in summer, his home thus remaining as before. He changed his sky but not his home.
From the above, where a taxpayer is temporarily abroad he is to be charged as a person actually residing within the tax jurisdiction upon the whole of his income, whether it arises within the tax jurisdiction or elsewhere.
v. Frequency, Regularity and Duration of Visits
In a situation dealing with residence of those who claimed only to be visitors to the taxing jurisdiction, the regularity and duration for the visits has been a major factor for consideration. In IRC v. Iysaght415 frequency was held to be a very important factor in the case, Mr. Lysaght had worked for many years in a family business in England with his family
415 (1927) 13 TC 511.
137 to Ireland where his parents had lived before him and he inherited an estate. He sold his property in England and after 1920 had no definite place of abode there. He remained a non-executive director of the company and made monthly visits to the United Kingdom for the purpose of director‟s meeting, staying usually for about a week at a time. In all the years of assessment concerned the maximum number of days he had ever spent in any one year in the United Kingdom was 101. On these occasions he stayed in a hotel. It was held, despite the fact that he had no settled residence here and did have one in Ireland and spent such short time here both on each visit and in the aggregate that he was resident and ordinarily resident in the United Kingdom.416