Treasury publishes statutory residence test
Draft legislation for statutory residence is due to take effect from April 2013
A SUMMARY OF RESPONSES to the statutory residence test along with guidance has been published by HM Revenue & Customs.
The draft legislation, which outlines the definition of tax residence in the UK, is largely based on case law, and is a response to the questions posed in the consultation published in June 2011.
The government has dropped the simple day-counting method to determine residence in favour of a test combining days spent in the UK with an individual’s other links to the country.
The test comprises three parts:
– Part A in itself would be enough to determine whether a person is a non-resdident. Factors include leaving the UK to carry out full-time work abroad; residency in another country; presence in the UK for fewer than 45 days in the current year; not having been present in the UK for three previous tax years. Additionally, if an individual has only been in the UK for one of the last three fiscal years, and has spent less than 10 days in the country in the present tax year.
– Part B contains factors that would be sufficient in themselves to make an individual resident. This includes presence in the UK for 183 days or more in a tax year; having only one home that is present in the UK; or simply carrying out full-time work in the UK.
– Part C will be used if an individual falls outside of Part A and B. It includes the presence of family in the UK; the availability of accommodation in the UK used during the tax year; substantive – but not full-time – work in the UK; presence in the UK for more than 90 days in either of the previous two tax years or simply spending more time in the UK than in any other country.
It was originally intended the test would come into effect in April 2012, but the date has since been pushed back to April 2013 after the government recognised the complex issues involved.