The new statutory residence test

HMRC have announced that a new statutory residence test will be introduced with effect from 6 April 2012. The rules do make clear when you will be treated as definitely UK resident and when you will be treated as definitely not UK resident. There are also detailed rules to determine your residence if you fall into the middle ground.

Am I definitely not resident?

If you have not been resident in the UK in any of the previous three tax years, you will definitely not be resident in the current tax year if you are here for fewer than 45 days. A day counts if you remain in the UK at midnight.

If you have been resident in the UK in any of the previous three tax years, then only if you are here for fewer than 10 days will you definitely not be resident in the current tax year.

You will also definitely not be resident in the UK if you leave the UK to work full-time abroad for at least a tax year working a 35 hour week, and are in the UK for less than 90 days and no more than 20 days working in the UK in the tax year (a day being at least 3 hours work, and not requiring your presence in the UK at midnight).

Am I definitely resident?

If you spent 183 days or more in the UK in a tax year you will definitely be resident here for that year. You will generally also be resident in the UK if you only have one home and it is in the UK, or if you carry out full-time work here. The work will be regarded as full time if it covers a continuous period of nine months and over that period no more than 25% of the duties are undertaken outside the UK.

Might I be resident?

Many people will not fall into either of the "definite" categories and in these cases whether you are resident in the UK in a given tax year will be determined by three factors:

  1. Whether you were resident in the UK at any point in the last three tax years;
  2. The number of days in the tax year you were in the UK; and
  3. Five criteria referred to as "connection factors".
  • Your family is UK resident
    Family means in this context your spouse, civil partner (but also including unmarried partners), but not if separated (by court order, or where it is likely to be permanent). It also includes your minor children unless they are only in the UK to go to school and spend less than 60 days of the holidays in the UK.
  • You have 'accessible' accommodation in the UK
    The test here is not ownership but accessibility, so if accommodation can be used by you it will count even if it is owned (and occupied) by someone else. The accommodation must however be used as a residence.
  • You have 'substantive' employment in the UK
    This is a different test to the full time work abroad, and means working in the UK for more than 40 days in a tax year (a day being at least three hours work).
  • You have been resident for more than 90 days in either of the previous two years
  • You spend more days in the UK than in any other single country
    his is only relevant for people leaving the UK.

The residency tests

Using these factors a sliding scale is then set out for each of 'Arrivers' and 'Leavers' dictating when they will be resident based on their day counts and the number of factors that they meet.

Arrivers

Days in the UK Test
Fewer than 45 days Always non-resident
45 – 89 days Resident if individual has 4 factors (otherwise not resident)
90 – 119 days Resident if individual has 3 factors or more (otherwise not resident)
120 – 182 days Resident if individual has 2 factors or more (otherwise not resident)
183 days or more Always resident

Leavers

Days in the UK Test
Fewer than 10 Always non-resident
10 - 44 days Resident if individual has 4 factors (otherwise not resident)
45 - 89 days Resident if individual has 3 factors or more (otherwise not resident)
90 - 119 days Resident if individual has 2 factors or more (otherwise not resident)
120 - 182 days Resident if individual has 1 factor or more (otherwise not resident)
183 days or more Always resident

It is important to remember that although these rules take effect from 6 April 2012, the determination of residence for tax years ended before this date continue to be by reference to the old mixture of statute, precedence and HMRC guidance.

Consultation

There are some inequalities in the proposed legislation and these are likely to result in some minor changes to the rules. If you would like to sign up for an update as soon as the rules have been finalised, please complete the brief form below:

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