New UK rules on determining residency

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New UK rules on determining residency

Postby gozomark » Wed 03 Apr 2013 09:16

UK HMRC has published new rules on helping people determine if they are UK resident or not. They reduce a lot of the grey areas. It also includes guidance on split year treatment.

www.hmrc.gov.uk/budget-updates/11dec12/ ... t-note.pdf

Its to apply from the tax year just about to start - its a 55 page document, but at its heart its fairly simple.

Statutory residence test

You will be resident in the UK for a tax year if:
you meet the automatic residence test, or the sufficient ties test. If you meet neither of these tests you are not resident for UK tax purposes for that tax year.

You will meet the automatic residence test in a tax year if: you meet any of the automatic UK tests, and you do not meet any of the automatic overseas tests.

automatic UK tests

First automatic residence test. You spend 183 days or more in the UK in the tax year.
Second automatic residence test. The second automatic residence test is relevant if you have a home in the UK.
Third automatic residence test You work full-time in the UK for 365 days or more with no significant break from UK work.

Automatic overseas tests

You are automatically non-resident for a tax year if you meet any one of the following tests.
First automatic overseas test You were resident in the UK for one or more of the three tax years preceding the tax year, and you spend fewer than 16 days in the UK in the tax year.
Second automatic overseas test. You were resident in the UK for none of the three tax years preceding the tax year, and you spend fewer than 46 days in the UK in the tax year.
Third automatic overseas test. You work full-time overseas for the tax year without any significant breaks from that overseas work, and:
you spend fewer than 91 days, excluding deemed days, in the UK in the tax year, and
the number of days in the tax year on which you work for more than three hours in the UK is fewer than 31.

Sufficient ties test
If you don’t meet any of the automatic overseas tests or any of the automatic UK tests, you should use the sufficient ties test to help you decide your UK residence status for a tax year. This test examines your ties to the UK in the following areas:
1. family
2. accommodation
3. work
4. number of days spent in the UK in the previous 2 tax years
5. whether you spend more time in the UK than elsewhere

and applies rules to determine whether those ties are sufficient for you to be considered UK resident for tax purposes.
Last edited by gozomark on Wed 03 Apr 2013 22:01, edited 1 time in total.
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Postby gozomark » Wed 03 Apr 2013 21:47

If you are going through the sufficient ties test, its important to realise that the number of days you can stay in the UK varies according to
1. number of ties tests you "pass"
2. whether been non tax resident in the UK for 3 or more years

see p20 and p21

at one extreme, if you "pass" 4 or 5 and UK resident for one or more of the three tax years before the tax year under consideration, then can only spend 15 days in the UK before becoming tax resident
at the other extreme , if you pass no more than 1 tie and you were not UK resident in any of the three tax years before the tax year under consideration and spent less than 90 days in the UK in those years, then you can spend 182 days in the UK
[this is my reading of the document]
Last edited by gozomark on Sat 13 Apr 2013 10:15, edited 1 time in total.
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Postby gozomark » Fri 12 Apr 2013 10:02

A supporter of Gozo SPCA has kindly produced a flow chart to help work out ones status - its available for free to any paidup members of the forum - just send me a message with your email address
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Postby rasputinluv » Thu 25 Jul 2013 12:14

Even if one has done considerable work in UK during a tax year, one may still be a nonresident based on UK ties or more like one may not qualify to be a resident. These residency tests are however very clear and straightforward. I am wondering how an income earned in UK will be treated from a tax point of view if one turns out to be non resident during the relevant tax year . Any thoughts ?
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Postby gozomark » Thu 25 Jul 2013 12:15

Isn't income earned in the UK taxable in the UK even if non-resident ?
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Postby rasputinluv » Fri 26 Jul 2013 08:53

Yes indeed. I was thinking about companies like Starbucks or Amazon, which are said to be paying very little tax mainly because they are non resident and operating through some overseas subsidiary.
I guess at least overseas income will be spared for individuals if they are non resident.
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Postby gozomark » Fri 26 Jul 2013 09:09

rasputinluv wrote:Yes indeed. I was thinking about companies like Starbucks or Amazon, which are said to be paying very little tax mainly because they are non resident and operating through some overseas subsidiary.
.


its because they push the expenses through the UK to minimise income - in Starbucks case the UK operation is charged a high royalty by one of its overseas subsidiaries
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Postby fatmanfilms » Sun 11 Aug 2013 09:55

rasputinluv wrote:Even if one has done considerable work in UK during a tax year, one may still be a nonresident based on UK ties or more like one may not qualify to be a resident. These residency tests are however very clear and straightforward. I am wondering how an income earned in UK will be treated from a tax point of view if one turns out to be non resident during the relevant tax year . Any thoughts ?


It will be taxable in the UK, however you will get the full UK personal allowance against any UK income.
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