Two recent landmark court rulings could lead to some individuals facing significant retrospective tax bills, as outlined below.

UK citizens living abroad as tax exiles
Thousands of UK citizens living abroad as tax exiles could find themselves facing a retrospective tax bill stretching back as far as the previous six years, following a recent Court of Appeal ruling.

The case involved businessman Robert Gaines-Cooper, who has lived in the Seychelles since 1976. Despite the fact that he had adhered to previous HM Revenue & Customs (HMRC) guidance by spending fewer than 91 days in the UK on average each year, the judges ruled he had nevertheless maintained ties with the country.

The Appeal Court said that the 91-day rule did not actually establish non-residency, and ruled that the UK had remained the 'centre of gravity' of the defendant's life and interests.

The ruling means that thousands of UK tax exiles could have their lifestyle scrutinised by the Revenue, with factors such as the number and length of visits to the UK, any economic and business ties, and ongoing connections such as membership of UK banks or sporting clubs, being taken into consideration.

Contractors using offshore tax schemes
Meanwhile, contractors who have used or are continuing to use offshore tax schemes could be the target of a new clampdown by the tax authorities.

The warning follows a ruling by the Royal Court of Justice, which recently dismissed an application for a judicial review in the case of a self-employed information technology contractor who sought to challenge a £100,000 backdated tax demand from HMRC.

The judge ruled that the backdating of the demand did not breach human rights law.

The Professional Contractors Group has warned that HMRC may now retrospectively apply the tax legislation as far back as 1987, when the relevant legislation was first introduced. Those targeted could have to pay both the fines and the backdated taxes.

It is thought there may be 2,500 taxpayers exploiting such arrangements, with around £100 million of income tax at stake.