De Beers heir defeats HMRC in tax residence battle
Jonathan Oppenheimer is a South African citizen born in Johannesburg, but spent much of his youth at school and university in England. When he was 18, his parents bought a London flat, held in trust, for him to use while at college. He then spent some years in South Africa doing national service, after which, in 1993, he went to work for Rothschild Bank in London. He married his US-national wife in England in 1994, and then worked for De Beers in London for a year. Then they moved to Zimbabwe for several years and then to South Africa.
Oppenheimer has always maintained a home in South Africa where his parents live and where he has spent a considerable amount of time. He is a beneficiary of the Harry Oppenheimer Family Continuity Trust, from which he has received large remittances. The Oppenheimer wealth, including his own, is held offshore in terms of ownership.
HMRC's interest in Oppenheimer began in 2007 when the family decided to move to the UK in order to send their children to preparatory school there. They also bought a listed country estate near London and spent around GBP34 million restoring it as a family residence.
In March 2019, HMRC issued him with final closure notices in relation to the tax years 2010/11, 2011/12, 2014/15, 2015/16 and 2016/17, during which it claims Oppenheimer was tax-resident in the UK. Its enquiry, closure notices and associated discovery assessments were predicated on remittances made to him by the family trust during that period, totalling over GBP20 million, resulting in an additional tax assessment of more than GBP10 millon.
Oppenheimer did not dispute that he was resident and ordinarily resident in the UK for the years 2010/11 and 2011/12 under the common law and under the statutory residence test for the years from 2014/15 onwards. However, he also claims that he was resident in South Africa and maintained a permanent home there.
The importance of this relates to the UK's tax treaty with South Africa, which contains provisions to determine tax residence in disputed cases. These provisions set the First-tier Tax Tribunal (FTT) the task of deciding whether the UK or South Africa is the state with which Oppenheimer's personal and economic relations (his 'centre of vital interests') are closer. If the UK, then he would be deemed to be treaty-resident solely in the UK; if South Africa, then he would be deemed treaty-resident in South Africa. However, if the 'centre of his vital interests' could not be determined, a 'tiebreaker' issue comes into effect in the shape of his nationality and 'habitual abodes'. If he had a habitual abode in the UK only, then he would be deemed treaty-resident in the UK; whereas if he also had a habitual abode in South Africa, the appeal would succeed because he is a South African national and not a UK national.
The burden of proof rested with Oppenheimer to disprove HMRC's assertion that he voluntarily decided to move to the UK in 2007 with his wife and three children, lived in the UK thereafter as a family and that his centre of vital interests was in the UK even though he retained property and interests in South Africa.
As well as days counted by HMRC, the FTT took into account a vast amount of information about Oppenheimer's way of life, including his South African tax returns, property portfolio in the UK and the US, the nature and funding of his South African residence, employment history, two London private members' clubs, golf clubs, flying licence, cricket team, squash clubs, voting habits and even UK shotgun certificates.
Ultimately, it decided that Oppenheimer's centre of vital interests was more likely to be South Africa than the UK. The FFT also found that he did have a habitual abode in South Africa: 'In the unusual facts of his life in the relevant period, his stays in both South Africa and the UK were both part of the settled routine of his life and were of sufficient frequency, duration and regularity to constitute habitual abodes in both countries', said the FTT. As Oppenheimer is a South African national, the answer to the tiebreaker question is that he is treaty-resident there. According, the FTT allowed his appeal and cancelled HMRC's assessments to tax (Oppenheimer v HMRC, 2022 UKFTT 00112 TC).
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