New UK Tax Residency Rules - 2013

The new rules for determining UK tax residency, called the Statutory Residence Test (SRT), were implemented with effect from April 6, 2013.

The new statutory tests involve a Four-part structure, comprising:

• The First Automatic UK Residency Test
• The Automatic Overseas (Non-Resident) Test
• The Second and Third Automatic UK Residency Tests
• The Sufficient Ties Test

Each test must be considered in turn, and only if the previous test fails to provide a conclusive answer - the following are a summary of those test set out in more detail in HMRC guidance.

The First Automatic UK Residency Test

If you spent 183 or more days in the UK during a tax year you meet the first austomatic UK residency test and are considered resident in the UK for the tax year.

Automatic Overseas Test

Where any of the following three automatic overseas tests are met the individual will be conclusively non-UK resident, without considering the other parts of the test:

• You were resident in the UK for 1 or more of the 3 tax years preceding the tax year, and you spent fewer than 16 days in the UK in the tax year
• You were resident in the UK for none of the 3 tax years preceding the tax year, and you spent fewer than 46 days in the UK in the tax year
• You work full-time overseas over the tax year, without any significant breaks during the tax year from overseas work, and:
  • you spend fewer than 91 days in the UK in the tax year
  • the number of days in the tax year on which you work for more than 3 hours in the UK is less than 31

Automatic Residence Test

Where the automatic overseas tests are not met, the following automatic residence tests must be considered in order to establish whether you are conclusively resident in the UK for the year. You will be resident without considering part C of the test if:

• You spend 183 days or more in the UK in the tax year
• You have a home in the UK there is at least one period of 91 consecutive days, at least 30 days of which fall in the tax year, when:
   you have a home in the UK in which you spend a sufficient amount of time, and either you:
   have no overseas home, or
   have an overseas home or homes in each of which you spend no more than a permitted amount of time
• You work full-time in the UK for any period of 365 days, with no significant break from UK work and:
   all or part of that 365-day period falls within the tax year
   more than 75% of the total number of days in the 365-day period when you do more than 3 hours of work are days when you do more than 3 hours of work in the UK
   at least 1 day which is both in the 365-day period and in the tax year is a day on which you do more than 3 hours of work in the UK

Sufficient UK ties test

If you do not meet any of the above automatic tests, you will need to use the sufficient ties test to determine your UK residence status for the tax year. You will need to consider your connections to the UK, called ties, and determine whether your ties, taken together with the number of days you spend in the UK, are sufficient for you to be considered a UK tax resident.

There are 5 factors to consider:

• Family ties  – Does the individual have a UK resident spouse, civil partner, co-habitee or minor children.
• Accommodation tie – Does the individual have a place to live in the UK which was available for a continuous 91 day period and they spent at least one night there (16 nights if owned by a relative).
• Work ties – Did the individual work for at least 40 days (minimum 3 hours per day) in the UK, in the year.
• 90 day tie – Did the individual spend more than 90 days in the UK in either of the two preceding tax years.
• Country tie – If an individual spends more midnights in the UK than anywhere else they will have a country tie.  A tie breaker exists in favour of the UK.

The importance of these connecting factors is then determined by the amount of time spent in the UK in the year:

UK resident for NONE of the 3 preceding tax years
Days in UK	Resident?
Less than 45	Always non-resident
46-90 days	If 4 connections
91-120 days	If 3 connections
121-182 days	If 2 connections
183 days or more	Always resident

 

UK resident for ONE of the 3 preceding tax years
Days in UK	Resident?
Less than 15	Always non-resident
16-45 days	If 4 connections
46-90 days	If 3 connections
91-120 days	If 2 connections
121-182 days or more	If 1 connection
183 days or more	Always resident

The attached UK Residency Flowchart provides an outline of how the rules will work in practice - it illustrates the complexity around the rules and why professional advice is absolutely essential in this area, if there is any question marks over residency status.