Residence to be Defined

HM Treasury has published a summary of responses to the June 2011 consultation document Statutory Definition of Tax Residence together with guidance and 50 pages of draft legislation intended to be introduced in next year’s Finance Bill.

The draft legislation outlining the definition of UK tax residence has, in the main, derived from case law.

Rather than simply counting the number of days to establish residence, HMRC favour a test that combines days spent in the UK with an individual's other ties to the country.

The tripartite test is comprised as follows;

 

Part A:  conclusive non-residence

Non-residence factors that would be sufficient in themselves to make an individual not resident. An individual would not be resident in the UK for a tax year if the fall within any of the following conditions:

  • were not resident in the UK in all of the previous 3 tax years and they are present in the UK for fewer than 45 days in the current tax year; or
  • were resident in the UK in one or more of the previous 3 tax years and they are present in the UK for fewer than 15 days in the current tax year; or
  • leave the UK to carry out full-time work abroad, provided they are present in the UK for fewer than 90 days in the tax year and no more than 20 days are spent working in the UK in any tax year.

 

Part B:  conclusive residence

Where Part A of the test does not apply, an individual will be conclusively resident for the tax year under Part B if they meet any of the following conditions:

  • are present in the UK for 183 days or more in a tax year; or
  • have only one home and that home is in the UK (or have two or more homes and all of these are in the UK); or
  • carry out full-time work in the UK.

 

Part C:  other connection factors and day counting

This would only apply to those individuals whose residence status is not determined by the other two parts above and whose circumstances are less straightforward. Here factors connecting a person to the UK would be relevant to an individual's residence status which would include:

  • Family– the individual's spouse or civil partner or common law equivalent or minor children are resident in the UK;
  • Accommodation– the individual has accessible accommodation in the UK and makes use of it during the tax year (subject to exclusions for some types of accommodation);
  • Substantive work in the UK– the individual does substantive work in the UK (but does not work in the UK full-time);
  • UK presence in previous year– the individual spent 90 days or more in the UK in either of the previous 2 tax years;
  • More time in the UK than in other countries– the individual spends more days in the UK in the tax year than in any other single country.

 

A statutory residency test should give businesses and individuals greater certainty, although consultation only covers individuals and not the residence of companies.

Comments on the latest document must be made by 13th September.

Leave a Reply

Your email address will not be published.

★ ★ ★ ★ ★

Very pleasant. Excellent price for what I needed. I will be a returning customer.

Rhino Review

Mr Paul D

Great staff. Customer focused and a team who recognise and understand their customers 100%.

Rhino Review

Vijay S

Fantastic accountants who helped me submit my last 2 years personal tax returns! I really rate this company!!!

QAccounting Review

Natalie

Fantastic service.

Rhino Review

Marco G

Been with QAccounting for several months now, very good service, very personal and the best prices I have seen.

QAccounting Review

Muhammed A

I switched over to QAccounting a few months ago and haven't looked back. I get to speak to my own client manager and accountant, the prices were the best I had seen, and I paid exactly what it said online (no extra costs). Very happy with QA.

QAccounting Review

Jeremy H