THE NEW STATUTORY RESIDENCE TEST
The 2013 Finance Bill has introduced new Legislation to put the matter of UK Residence Status on a legal footing rather than having to rely on past practices, changes in interpretations and case law.
This should provide more certainty to people moving in and out of the UK temporarily or permanently.
The new rules will impact the following main taxes: Income Tax, Capital Gains Tax and in some cases Inheritance Tax.
There are 3 Tests which need to be looked up:
First Test: The Automatic Overseas Test. If any of the three conditions are met, then an Individual will not be UK Resident for the tax year in question. There is no need to consider the other two tests. If none of the three conditions are met then the individual needs to consider the second test.
Second Test: The Automatic UK Test: If any of the three conditions are met, then the individual will be UK Resident for the tax year in question. There is no need to consider the third and final test. However if none of the conditions are met then the third test needs to be considered.
Third Test: Sufficient UK Ties Test: Different requirements and conditions apply depending on whether the individual is arriving in the UK or leaving the UK. This includes looking at the number of days spent in the UK as well as the number of ties this individual has in the UK. Put simply the more ties in the UK the less number of days an individual can spend here in order to remain non UK resident. Please note that, if at any point an individual spend more than 182 days in the UK in any tax year he will be UK resident for that tax year regardless of the number of ties he has here.
Other previous concessions have been put on a statutory footing such as the split year treatment.
While the news rules will help an individual determine his UK residence status and should give some certainty, they also make it a lot more difficult to sever the UK residence status for leavers.
The Legislation runs to 67 pages and HM Revenue & Customs have published guidance which is contained in a 106 page booklet.
If you need help to determine your UK Residence Status and you are daunted by the length of the Legislation and Guidance give us a call to discuss your circumstances and see if we can help.
