Plummer Parsons Chartered Accountants UK Residence November 2011

1. Active PrActice UPDATEs NOveMBer 2011
plummerparsons
ap-r-nov2011
UK Residence – new
statutory test proposed
from April 2012
It 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 UPDATE
which 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 will
legal 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 abroad
to 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 new
of residence for immigration or national statutory residence test from April 2012, Some words above are in italics which
insurance 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 tax
A person may be resident in another country, by the tax profession and are therefore likely
but this does not affect their UK residence to become law in a similar form, subject to residence status test
position. only a few amendments. from April 2012
Assuming they are domiciled here, UK
residents 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 decide
arise. Non-residents may only be liable for if you: a person’s residence status. The test is in
UK 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 to
income. Most non-residents are not liable to year definitively decide the status for the majority
capital gains tax even on UK assets although of people whose cases are relatively
2. Come to the UK with the intention of
some individuals who are only temporarily straightforward. Only those with more
living here permanently or to work for an
non-resident for less than 5 complete tax complicated situations will need to work
extended period with no end date
years 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 spend
individual advice to your own situation. 91 days or more in the UK on average
over four tax years
18 Hyde Gardens www.plummer-parsons.co.uk
Eastbourne BN21 4PT
01323 431 200 eastbourne@plummer-parsons.co.uk

2. Part A: Are you non-resident? An 3. They have accessible accommodation Days spent in Impact of factors
individual is definitely non-resident in the in the UK UK on residence
UK for a tax year if they qualify under any 4. They spent 90 days or more in the UK status
of 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 individual
Part B: If not, are you resident? important definitions, eg ‘resident family’ will
has 3 factors or
An individual is definitely resident in the UK all be set out in the legislation. There will
more (otherwise not
for 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 resident
If A and B both apply, the person is not
resident. (This could happen in very few The current rules will continue to apply for
For those not resident in the UK in the
cases) 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 to
there are tests under part C for those 1. They have a UK resident family; allow individuals to apply the new definition
arriving 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 accommodation
harder for current residents to become
non-resident whereas individuals coming to
in the UK Areas where we can
the 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.
help
residence so easily.
Residence is a complex subject where
The way these factors are combined with
For those who are resident in the UK in individuals need professional guidance
days spent in the UK to determine residence
one 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 than
factors: 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.