UK Resident Rules Defined

With effect from 6 April 2013 the UK introduces a Statutory Residence Test (SRT) for the first time.

The revised draft legislation (issued on 11 December 2012 and open to comment until 6th February 2013) retains the originally proposed three part test to determine UK residence with a number of additions.

Automatic residence test

An individual will be automatically UK resident should they:

  • Spend 183 days or more in the UK in a tax year; or
  • Spend at least 30 days at their UK home and it is either their only home or they spend less than 30 days in their overseas homes; or
  • Carry out full time work in the UK; or
  • Die in the year, having been UK resident in all of the three preceding tax years and had a UK home.

Automatic overseas test

An individual will be automatically non-resident if they:

  • Were UK resident in at least one of the previous three UK tax years, but spend less than 16 days in the UK and do not die in the tax year; or
  • Were non UK resident in all of the three preceding tax years and spend less than 46 days in the UK in the years; or
  • Leave the UK to carry out full time work abroad, spend less than 90 days in the UK and no more than 31 days working in the UK; or
  • Die in the year having spent less than 46 days in the UK and were not UK resident in either of the two preceding tax years.

The sufficient ties test

If the automatic tests are not satisfied then the sufficient ties test must be considered.  This test combines factors connecting individuals to the UK with time spent in the UK.

There are 5 factors to consider:

  1. Family ties  – Does the individual have a UK resident spouse, civil partner, co-habitee or minor children.
  2. Accommodation tie – Does the individual have a place to live in the UK which was available for a continuous 91 day period and they spent at least one night there (16 nights if owned by a relative).
  3. Work ties – Did the individual work for at least 40 days (minimum 3 hours per day) in the UK, in the year.
  4. 90 day tie – Did the individual spend more than 90 days in the UK in either of the two preceding tax years.
  5. Country tie – If an individual spends more midnights in the UK than anywhere else they will have a country tie.  A tie breaker exists in favour of the UK.

The importance of these connecting factors is then determined by the amount of time spent in the UK in the year:

UK resident for NONE of the 3 preceding tax years

Days in UK

Resident?

Less than 45

Always non-resident

46-90 days

If 4 connections

91-120 days

If 3 connections

121-182 days

If 2 connections

183 days or more

Always resident

 

UK resident for ONE of the 3 preceding tax years

Days in UK

Resident?

Less than 15

Always non-resident

16-45 days

If 4 connections

46-90 days

If 3 connections

91-120 days

If 2 connections

121-182 days or more

If 1 connection

183 days or more

Always resident

 

The detailed legislation, which is outside the scope of this article, provides for certain days to be ignored, such as transit days and exceptional circumstances (maximum 60 days), but also provides for times when the “midnight rule” for day counting may be displaced by any part of the day.  In the year of death, time allowed in the UK may also have to be apportioned.

Summary

The proposal to define residence in statute is a welcome departure from the existing rules and should enable taxpayers, for the first time, to know with certainty whether they will be treated as non-UK resident for tax purposes.