MONACO Millionaires — the elite group of business people who reside outside the UK to slash their tax bill — face a crackdown by Revenue & Customs on the number of days they can spend in Britain, after a surprise legal decision.

Accountants yesterday accused HM Revenue & Customs (HMRC) of introducing a stealth tax on the wealthy after it ignored its own guidelines to pursue a case against Robert Gaines-Cooper, a Seychelles-based multimillionaire.

Mike Warburton, a senior tax partner at Grant Thornton, said: “The present Government doesn’t like people getting out of tax by moving offshore so they keep moving the goalposts and changing the rules by the back door. There are going to be a lot of people who are significantly shaken by this decision.”

Some of Britain’s most successful entrepreneurs live in offshore havens such as Monaco, the Isle of Man, Jersey and Switzerland to avoid paying income and capital gains tax on UK dividends and assets.

Tina Green, the wife of Sir Philip Green, the owner of the Arcadia Group of high street shops, has been a resident in Monaco since 1998, which meant that the £1.2 billion dividend that she received from Arcadia last year escaped the clutches of the taxman. Laurence Graff, the British-born owner of Graff Diamonds International, lives in Switzerland, while the Barclay brothers are based on the island of Brecqhou, off Sark.

According to HMRC’s guidance note IR20, people who wish to be considered non- resident must not spend more than 183 days in any single year in the UK. Over four years, the average number of days per year must not exceed 90. Since 1993 the HMRC has discounted the days of arrival and departure from the total.

“A lot of people fly in every Monday and go home on Wednesday evening, which counts as one day,” Mr Warburton said. “This allowed them to work 50 three-day weeks a year in the UK and still have only spent 50 days here under Revenue guidelines.”

But the taxman pursued Mr Gaines-Cooper, whose businesses have ranged from the sale of jukeboxes to orthopaedic products, because, it argued, he retained sufficient ties to the UK to be considered a resident. The British-born 69-year-old was a member of the Rolls-Royce Owners’ Club, enrolled his son at Eton and travelled to the UK for Royal Ascot and pheasant shooting.

The HMRC sought to count every night spent in the UK by Mr Gaines-Cooper, turning the traditional Monday-to-Wednesday visit from one day in the UK to two days.

The Special Commissioners, who hear every tax dispute before it goes before the High Court, found in the HMRC’s favour. Mr Gaines-Cooper plans to appeal in the High Court, although the appeal may not be heard for 12 months.

Stephen Pallister, a tax partner at Charles Russell, said that the ruling meant tax experts could not rely on the HMRC’s own guidance notes. “The Commissioners have always had the power to overrule aspects of the Revenue guidelines but they very rarely do so, which gives them a lot of weight,” he said. “The ruling should put people on guard because it raises the question of which other guidelines could now be picked on?”

The HMRC said yesterday: “Our efforts are focused on applying the law correctly and fairly. We are considering the impact of these cases to ensure that the principles are reflected in the guidance available.”

Revenue sources insisted that decisions on non-residency were based on more than the number of days spent in the UK. The tax office is almost certain to amend its guidance to reflect the tough new stance.

• More than 200 Revenue and Customs offices could be shut, with a loss of 12,500 jobs, the PCS union said as consultations on cuts began. The move would double job cuts Revenue and Customs is making in Gershon reforms. Mark Serwotka, PCS general secretary, said that the body would become “unfit for purpose”. The department said that it had not outlined specific cuts and the integration of tax and customs work had created chances to cut offices.

  NON-RESIDENCY: THE RULES

  Non-residents are liable only to pay tax on income arising in the UK, not including dividends and capital gains on assets. To qualify for non-residency, people must:

• Lifestyle factors such as club memberships, social events and family ties will also be taken into account when deciding non-residency status

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