Determining UK Tax Status under the Statutory Residence Test.
With effect from 6 April 2013, your UK tax residence status is determined using a statutory residence test which has three parts:
Part A – factors that will conclusively determine when someone is not resident for UK tax purposes.
Part B – factors that will conclusively determine when someone is resident for UK tax purposes.
Part C – will apply only to those with more complex affairs who cannot conclusively determine their status under Part A and Part B, using various connections with the UK to measure the position.
These connections, known as “UK ties”, are then referenced against the amount of time spent in the UK to determine whether UK tax residence exists.
Part A – Conclusive Non-Residence
Part A of the test will conclusively determine that an individual is not resident in the UK for a tax year if they fall under any of the following conditions, namely they:
Were not resident in the UK in all of the previous three tax years and they are present in the UK for fewer than 46 days in the current tax year; or
Were resident in the UK in one or more of the previous three tax years and they are present in the UK for fewer than 16 days in the current tax year; or
Carry out “full-time work abroad”, provided they are present in the UK for fewer than 91 days in the tax year and no more than 30 days are spent working in the UK in the tax year. (In broad terms, they must work full-time abroad for more than one complete UK tax year and a “UK work day” is a day spent in the UK where more then 3 hours of work are carried out.)
An individual who does not fall within Part A would not necessarily be UK tax resident. They would instead need to consider Part B or Part C of the test.
Part B – Conclusive Residence
If 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, namely they:
- 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 have UK and overseas homes and spend no more than a certain amount of time in the overseas homes); or
- Carry out full-time work in the UK.
An individual who does not meet any of the conditions in Part B will not necessarily be non-resident; instead they will need to consider Part C of the test.
In cases where an individual satisfies a condition in both Part A and Part B, the individual will be non-resident.
Part C – Other Connections/Day Counting
As summarised above, Part C will apply only to those individuals whose residence status is not determined by Part A or Part B and, therefore, whose circumstances are less straightforward.
The UK ties referred to in Part C of the test are:
- Family – the individual’s spouse or civil partner or common law equivalent (provided the individual is not separated from them) or minor children are resident in the UK.
- Accommodation – the individual has available accommodation in the UK and makes use of it during the tax year;
- Substantive work in the UK – the individual has substantive employment or self-employment in the UK (defined as 40 work days of more than 3 hours in the tax year).
- UK presence in previous years – the individual spent more than 90 days in the UK in either of the previous two tax years.
- More time in the UK than other countries – the individual spends more days in the UK in the tax year than in any other single country. (This tie only needs to be taken into account for “Leavers” – see below.)
These ties are referenced to the number of days spent in the UK to form a “scale” which then determines whether the individual is UK tax resident or not. There are separate scales for “Arrivers” (individuals who have been non-resident throughout the previous three tax years) and “Leavers” (individuals who were resident at some point in the previous three tax years).
Years of Arrival/Departure
Under certain circumstances you can “split” a UK tax year and have a period of residence and a period of non-residence within the year. The rules are complex and differ depending on whether you are arriving or leaving. We would suggest taking advice well in advance of your UK arrival/departure to ensure you plan your tax residence status in the most tax efficient manner.