Plummer Parsons Chartered Accountants UK Residence November 2011
Active PrActice UPDATEs NOveMBer 2011 plummerparsons ap-r-nov2011UK Residence – newstatutory test proposedfrom April 2012It surprises many people arriving in the UK, or leaving to go abroad,that UK tax residence status is not currently defined by legislation,but hinges on the interpretations of various legal cases, most of Personal Planning UPDATEwhich happened decades ago when life was very different.There is also H M Revenue and Customs Considering the difference that being non- 4. Come to the UK for purposes such as(HMRC) published advice which has no resident often makes to the amount of tax employment which means they willlegal status. Indeed, HMRC has even payable, this means that for an unacceptable remain in the UK for at least 2 years (argued against a taxpayer, who relied on number of people, their UK tax position can whether or not they exceed 183 days)their published advice, and won! According be very uncertain, despite best professional 5. Usually live in the UK and go abroadto a recent Treasury report, residence is advice. for short periods such as business trips‘vague, complicated and perceived to be or holidays.subjective’. It is not the same as the definition The Government plans to introduce a newof residence for immigration or national statutory residence test from April 2012, Some words above are in italics whichinsurance or other parts of UK law. which has recently been published for indicate there is no agreed or objective consultation, with a view to implementing definition of what these terms mean.Complicated legislation. Although the proposals are still draft they have generally been well received Proposed new taxA person may be resident in another country, by the tax profession and are therefore likelybut this does not affect their UK residence to become law in a similar form, subject to residence status testposition. only a few amendments. from April 2012Assuming they are domiciled here, UKresidents are liable to UK tax on all their Current rules The proposed new rules look at days in the UK, and a number of objective factors,worldwide income and gains, wherever they Currently you will be considered UK resident which link an individual to the UK, to decidearise. Non-residents may only be liable for if you: a person’s residence status. The test is inUK tax on UK based investment or property 1. Spend 183 days in the UK in any tax 3 parts. Parts A and B are designed toincome. Most non-residents are not liable to year definitively decide the status for the majoritycapital gains tax even on UK assets although of people whose cases are relatively 2. Come to the UK with the intention ofsome individuals who are only temporarily straightforward. Only those with more living here permanently or to work for annon-resident for less than 5 complete tax complicated situations will need to work extended period with no end dateyears may be liable. There are exceptions to through part C.these general rules so it is vital that you seek 3. Come to the UK temporarily and spendindividual advice to your own situation. 91 days or more in the UK on average over four tax years18 Hyde Gardens www.plummer-parsons.co.ukEastbourne BN21 4PT01323 431 200 firstname.lastname@example.org
Part A: Are you non-resident? An 3. They have accessible accommodation Days spent in Impact of factorsindividual is definitely non-resident in the in the UK UK on residenceUK for a tax year if they qualify under any 4. They spent 90 days or more in the UK statusof the following conditions: in either of the previous two tax years Fewer than 45 Always non-resident• They were not resident in the UK in 5. They spend more days in the UK than days all of the previous three tax years and any other single country. 45 – 89 days Resident if individual they are present in the UK for fewer has 4 factors than 45 days in the current tax year; The way these factors are combined with (otherwise not or days spent in the UK to determine residence resident)• They were resident in the UK in one or status is as follows: 90 – 119 days Resident if individual more of the previous three tax years, Days spent in Impact of factors has 3 factors or and they are present in the UK for UK on residence more (otherwise not fewer than 10 days in the current tax status resident) year; or Fewer than 10 Always non-resident 120 – 182 days Resident if individual• They leave the UK to carry out full-time days has 2 factors or work abroad, provided they are 10 - 44 days Resident if individual more (otherwise not present in the UK for fewer than 90 has 4 factors resident) days in the tax year and no more than (otherwise not 183 days or more Always resident 20 days are spent working in the UK in the tax year. resident) It is proposed that, unlike the current situation, 45-89 days Resident if individualPart B: If not, are you resident? important definitions, eg ‘resident family’ will has 3 factors orAn individual is definitely resident in the UK all be set out in the legislation. There will more (otherwise notfor a tax year if they qualify under any of also be the possibility to split a tax year on resident)the following conditions: arriving or leaving. 90 – 119 days Resident if individual• They are present in the UK for 183 has 2 factors or It has also been proposed that a new days or more in a tax year; or more (otherwise not anti-income tax avoidance rule should be• They have only one home and that resident) introduced that will prevent individuals home is in the UK (or have two or 120 – 182 days Resident if individual from avoiding income tax by being non-UK more homes and all of these are in has 1 factor or resident for only a short period (less than five the UK); or more (otherwise not complete tax years). It is expected to work in• They carry out full-time work in the UK. resident) a similar way to the existing capital gains tax anti-avoidance rule. 183 days or more Always residentIf A and B both apply, the person is notresident. (This could happen in very few The current rules will continue to apply for For those not resident in the UK in thecases) the assessment of tax liability in tax years previous three years (arrivers) the test prior to the introduction of the statutory test, considers 4 relevant factors:Part C: If neither A nor B is conclusive including 2011/12. It is not proposed tothere are tests under part C for those 1. They have a UK resident family; allow individuals to apply the new definitionarriving and leaving the UK. The tests 2. They have substantive UK employment retrospectively to calculate tax for prior years.are different for those arriving from those (including self-employment);leaving because it is felt that it should be 3. They have accessible accommodationharder for current residents to becomenon-resident whereas individuals coming to in the UK Areas where we canthe UK should not be deemed to acquire 4. They spent 90 days or more in the UK in either of the previous two tax years. helpresidence so easily. Residence is a complex subject where The way these factors are combined withFor those who are resident in the UK in individuals need professional guidance days spent in the UK to determine residenceone or more of the previous three years to ensure they arrange their affairs status is as follows:(leavers) the test considers 5 relevant to avoid paying more UK tax thanfactors: necessary. Those who are not UK domiciled (not covered in this leaflet)1. They have a UK resident family face even more complexity.2. They have substantive UK employment (including self-employment) If you might be affected please contact us to discuss your specific circumstances.