Trial Threatens Hands's Guernsey Tax Residence
Thursday, February 11, 2010
Private equity tycoon, Guy Hands has filed papers with the Southern District Court of New York in an attempt to prevent a court case between his Terra Firma private equity firm and Citigroup being transferred to London, arguing that the move could jeopardize his status as a Guernsey resident for tax purposes.
The case surrounds financial advice provided to Terra Firma by Citigroup in the lead up to the 2007 acquisition of entertainment
group EMI. Hands alleges that Citigroup withheld information pertaining to other
bids, inflating the price paid for EMI to GBP4.2bn, of which GBP2.6bn was
debt, financed by Citigroup. It emerged last week that EMI reported losses of
GBP1.75bn last year, and will likely need to be financially propped up by Terra
Despite Citigroup being headquartered in New York - where Hands’s complaint
was filed - the firm has applied for the location of the court case to be changed
to London, where the acquisition was completed – reportedly to mitigate the size of
any potential restitution payment.
Objecting, Hands has stated that holding the court case in the UK would necessitate
him spending significant time in London, which could jeopardize his
tax status, potentially making him liable to UK tax. Should HM Revenue and Customs deem him again tax resident, Hands claims he could be subject
to a claim for personal income tax and capital
In his submission to the court, Hands emphasized that he had not stepped foot in the UK since he announced his move to Guernsey in early-May 2009, and underscored that it was necessary to remain outside the UK for a period of around three years. Hands, who has on occasion spoken out against the UK’s tax system, detailed in the court deposition that despite having his immediate family located in the South of the UK, in Kent, family visits must take place in Guernsey, to avoid the possibility of triggering an HMRC investigation.
UK case law has in recent years seemed to favour HMRC's ever-widening interpretation of UK domicile - notably HMRC v Hankinson, and HMRC v Grace - and British expats now have to ensure that they more or less sever all ties with the UK in order to escape the UK tax net.