It has for some years been a concern that English law lacked any clear definition of “residence”. Historically, HM Revenue & Customs (HMRC) published guidance which showed how they, at least, interpreted the law. Any clarity this might have given was lost when HMRC ignored the interpretation found in their guidance in the well-publicised claim they brought against Robert Gaines-Cooper.
In the face of this uncertainty, the Finance Act 2013 introduced a new statutory residence test that has applied from April 6, 2013. It is intended to provide a conclusive decision on each person’s residence. Of course, in reality the position is still not always clear.
A scenario where the rules need to be checked closely is when a non-resident individual is moving to the UK. It is important to know precisely when they become UK resident and, if they work or own assets in another country with lower tax rates than the UK, whether they can avoid or delay becoming UK resident.
The details of the test are complex (and beyond the scope of this article), but the following points may be of use:
• If you have not previously been UK resident, you can now spent up to 45 days in the UK in each tax year and automatically remain non-resident;
• If you have work outside the UK full-time, with no significant breaks from that work, the law is more lenient. Provided you do not work in the UK for more than 30 days, you can spend a total of 90 days in the UK and remain non-resident;
• If you do not have a home in the UK, you can still spend up to 182 days in the UK without automatically becoming resident;
• If you do have a UK home and spend at least 30 days there, and do not spend at least 30 days in a home in another country, then spending more than 90 consecutive days in the UK will automatically make you UK resident; and
• If you fall between these lines, for example if you own no home in the UK and work outside the UK full-time, and in one tax year spend more than 90, but fewer than 182, days in the UK, then the position will be more complex and will depend on many details of your lifestyle, including various connections you may have to the UK and exactly how many days you spend here.
A scenario where the rules need to be checked closely is when a non-resident individual is moving to the UK
In some cases, the result of the new tests is clear, but in others the position is still uncertain. In any event, there is no doubt that three particular issues are of primary importance under the new rules:
• The number of days you are actually present in the UK each tax year;
• Whether you have a house in the UK and/or abroad; and
• Whether you work full-time abroad.
If you are coming to the UK in the near future, or on a regular basis, and you are concerned to avoid accidental UK tax residence, you will need to consider the position carefully and most likely take advice on your tax residence.
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