Residency test to be delayed
Draft 2012 Finance Bill includes no reference to statutory residency test
THE STATUTORY RESIDENCY TEST looks likely to be delayed until 2013 at the earliest after it was left out of the 2012 draft Finance Bill.
The Treasury today published the 300 page overview of the bill. As expected, it includes sections on the reform of the taxation of non-domiciled individuals, charitable donations for inheritance tax, controlled foreign companies legislation and a response to the consultation on working with tax agents. There is also a wave of anti-avoidance legislation.
However, the government did not include anything on the statutory residency test. It consulted over the summer on the test, which was designed in response to ambiguity over the rules determining whether an individual was resident in the UK for tax purposes. The proposed test was a mix of factors such as days spent in the UK, the residency status of the family, living arrangements and employment in the UK.
It was expected to be included in the draft bill, but Exchequer secretary to the Treasury David Gauke (pictured) said it will not be introduced until April 2013.
“The consultation on tax residence raised a number of detailed issues which will require careful consideration to ensure the legislation achieves its important aim of providing certainty for individuals and businesses,” he said. “The government will therefore legislate the statutory residence test in Finance Bill 2013 to take effect from April 2013 rather than April 2012. It will introduce any reforms to ordinary residence at the same time. This will give time to consult thoroughly on the detail of these changes well in advance of implementation.”
Sean Drury, international mobility partner at PwC, said: “The announcement this morning that the new statutory rules on residence status will be delayed for a year to 2013 will disappoint employers and individuals who were hoping for early certainty on the position. Although this latest consultation has been running since June, discussions have been taking place for the last eight years.”
John Whiting, tax policy director at the CIOT, said that it was right that the government is taking its time on the issue.
“We are very committed to the principle of a statutory residence test for the UK: we have long argued that one is needed to help modernise our tax system and have put in a great deal of work on the concept over the last few years,” he said.
“However, the work has shown how difficult a measure this is and it is surely right to take the necessary time to work out proper answers to all the issues raised in the consultation. This is something that has to be ‘right first time’: we cannot have something rushed into legislation with loose ends and unclear issues.”