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October 2, 2013

Statutory Residence Test

Historically a person’s UK residency status has been determined based on an analysis of the number of days spent in the UK together with factors based on case law.  HMRC's guidance was published in the booklet HMRC 6.

However a new statutory residence test (SRT) was introduced from 6 April 2013, therefore a taxpayers residence status for the tax year 2013/14 onwards will be dictated by its new rules.

An Overview of the Relevant Principles

The basic rule is that, a person is UK resident in a tax year where either:

1. The 'automatic residence test' is met, or

2. The 'sufficient ties test' is met

Where neither of the tests is met, the taxpayer is non UK resident for that year.

The automatic residence test is met if the individual meets any of the four automatic UK tests and none of the automatic overseas tests.

Therefore if an individual meets one or more of the automatic UK tests, it is then necessary to consider whether any of the automatic overseas tests apply to prevent the individual being UK resident.

Alternatively, where none of the automatic UK tests are met, the next step will be to consider the sufficient ties tests.

The tests themselves are set out clearly in the legislation - however a complication is that key terms are often defined later in the statute and may themselves require the advisor to consider a number of different steps or conditions.

Specific 'split year' rules apply in relation to the years of arrival and departure.

Key Areas to Consider

A number of key areas to consider when applying the tests include:

  • days in the UK at midnight - whilst days where the taxpayer is not in the UK at midnight are generally excluded from counting towards the day limits there are circumstances in which this basic provision is overridden and the day is deemed to be a day spent in the UK
  • transit through the UK - there are specific rules to determine whether days in the UK at midnight where passengers are in transit count towards the day limit - care should be taken to consider whether any substantial activities unrelated to the travel are being undertaken
  • exceptional circumstances - this term is now defined in statute but perhaps more interestingly the number of days that may be ignored due to exceptional circumstances has been capped at the lower figure of 60 days
  • some of the tests require an assessment of the taxpayer's residence status in the past 3 tax years.  The general rule is that the residence status for the years in question should be determined based on the rules applying at the time, however for the tax years 2013/14 to 2017/18 only, the statutory residency test may be used to establish a persons residence status in the pre-commencement years - however this will only be relevant to determining their residence status under the SRT and will not affect their tax position for those earlier yeas
  • there are specific tests applicable to determine the residence status of deceased persons
  • for those working overseas there are a number of conditions that must be met for the work to be treated as full time work overseas, care should be taken to consider when work begins and the impact of any breaks in work
  • the definition of 'home' will not normally include holiday homes used occasionally however it is not necessary for the taxpayer to have an interest in the whole or part of the property for it to be treated as a home
  • the potential impact that family living arrangements can have on a persons residency status


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