On 11 December 2012, the Government published draft legislation establishing a statutory
residence test for individuals coming to and leaving the UK. The new test is expected to
take effect from 6 April 2013 and will determine an individual’s liability to UK income tax,
capital gains tax and (in some cases) inheritance tax. Many of the new provisions differ
from the current residency rules and existing non-UK residents who expect to spend some
time in the UK in tax year 2013/14 should check whether the new test will affect them.
Background
At present, the UK does not have a statutory test to
establish UK residency. We have a combination of case
law, some statutory provisions and non-binding guidance
from H M Revenue and Customs. The rules are complex
with many “grey areas” meaning taxpayers cannot
always be certain how their tax affairs will be assessed.
The new rules seek to produce a test that taxpayers can
use to provide a conclusive answer on whether they are
UK resident from one tax year to the next.
There is a further test that applies to determine a
deceased individual’s tax liability and there are particular
definitions for what constitutes a “day spent in the UK”
and a “working day”. To determine residence in preceding
tax years (for this and the tests below), the prevailing rules
for that year apply; however, you can elect for the new
rules to apply if this would be beneficial.
Automatic residence test
The new rules
You will be classified as UK resident in tax year 2013/14 if
any of the following apply:-
The new statutory rules consist of three separate tests:-
• you spend 183 days or more in the UK;
1. an automatic non-residence test;
• you have a home in the UK for a period of more than 90
days, are present there on at least 30 separate days
during the tax year and, while you have that UK home,
there is a period of 91 consecutive days when you have
no home overseas or you have one or more homes
overseas in none of which you are present for more
than 30 days during the tax year; or
2. an automatic residence test; and
3. a “sufficient ties” test.
If you satisfy the non-residence test, you will be classified
as non-UK resident. Otherwise, you will need to look at
the second two tests and if you satisfy either one, you will
be regarded as resident in the UK for tax purposes.
Automatic non-residence test
You will be classified as non-UK resident in tax year
2013/14 if any of the following apply:• you were resident in the UK for one or more of tax
years 2010/11, 2011/12 or 2012/13 and spend fewer
than 16 days in the UK in 2013/14;
• you were resident in the UK for none of tax years
2010/11, 2011/12 and 2012/13 and spend fewer
than 46 days in the UK in 2013/14; or
• you work full-time overseas in 2013/14 and spend
fewer than 91 days in the UK of which fewer than 31
days are working days.
• you work full-time in the UK for 365 days or more with
no significant break, all or part of that work period falls
within 2013/14 and more than 75% of the total number
of days in 2013/14 that are working days, are working
days spent in the UK.
There is a fourth test applicable to deceased individuals.
“Home” has no statutory definition so care must be taken
that any place you use when in the UK cannot be
classified as such. The guidance available suggests that
genuine holiday homes and temporary retreats will not be
caught but this is subject to conditions.
Private Client Bulletin March 2013
The new UK Statutory
Residence Test
Action needed
This test looks at your ties to the UK. These are listed
below with reference to tax year 2013/14.
If you believe yourself to be non-UK resident but expect
to spend some time in the UK in tax year 2013/14, you
should consider how the new residency rules will impact
upon you.
• Family tie: Your spouse, civil partner, cohabiting
partner or minor child is UK resident in 2013/14. There
are exceptions for minor children who are in the UK for
full-time education or who you visit in the UK for fewer
than 60 days.
• Accommodation tie: You have accommodation
available to you for 91 days or more in 2013/14 and
you spend one or more night there (or 16 or more
nights if the accommodation is that of a close relative).
• Work tie: You do more than three hours work a day in
the UK for at least 40 days in 2013/14.
• 90 day tie: You spend more than 90 days in the UK in
either or both of 2011/12 and 2012/13.
• Country tie: The UK is the country in which you are
present for the greatest number of days in 2013/14.
This tie only applies if you are resident in the UK for
one or more of 2010/11, 2011/12 or 2012/13.
In addition, if you were non-UK resident in 2010/11 and
2011/12, you should take any steps possible to prevent
yourself being UK resident in this tax year (2012/13) as
residency in this year will make it more difficult for you to
avoid being caught under the new rules in 2013/14. Time
is running out but there may still be steps you can take.
For more detailed advice on the new residency
rules and how they may affect you, please contact
Camilla Wallace or your usual Wedlake Bell adviser.
Camilla Wallace
Partner, Private Client
Tel: 020 7406 1678
Fax: 020 7406 1604
Email: [email protected]
The number of “ties” that are sufficient to make you UK
resident depend upon whether you have been UK
resident for any one of the last three tax years (a “recent
UK resident”) and how many days you have spent in the
UK. The table below shows how many ties will be
sufficient to establish UK residency in any of the given
periods:Days spent in
Ties needed for a
the UK in
recent UK
2013/14
resident
Ties needed for
someone who is
not a recent
UK resident
16-45
At least 4
n/a
46-90
At least 3
All 4
91-120
At least 2
At least 3
Over 120
At least 1
At least 2
The number of ties needed for a deceased individual is
calculated differently.
This publication is for general information only and does not seek to give
legal advice or to be an exhaustive statement of the law. Specific advice
should always be sought for individual cases. This reflects the law as
stated at March 2013.
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The term Partner is used to refer to a member of Wedlake Bell LLP.
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Private Client Bulletin March 2013
Sufficient ties test