Updated: May 22, 2019
Are you certain you are non-UK resident for tax? Maybe not after 6 April 2013!
With effect from 6 April 2013, HMRC’s Statutory Residence Test applies. This means that it is now more difficult for a person to remain non-UK resident (for example while residing in Dubai), and more difficult for anyone leaving the UK to establish non-UK residency.
Residence status for UK tax purposes has been historically difficult to determine. On December 11th, 2012 the HM Treasury published the draft Finance Bill 2013 which included the legislation to establish a new statutory residence test (SRT) as of 6th of April 2013 SRT now applies to individuals for income tax, capital gains tax, inheritance tax and corporation tax. This legislation supersedes any previous residence legislation.
The legislation was designed to solidify HMRC guidance on UK residency. Previously it was possible to break residency in the UK by maintaining an average of less than 91 days in the UK and having little or no UK work, even if family and home remain in the UK. As of the 6th April, 2013, it is now necessary to take the Statutory Residence Test. This is a multi-stage test used to find out if someone is UK resident for tax purposes. The test does not apply to companies, neither does it apply to tax years before 6 April 2013.
You will automatically be considered a non – UK resident if either:
You were non-resident throughout the whole of the previous 3 tax years and present in the UK for less than 46 days in the current tax year.You were resident in the UK in at least one of the previous 3 tax years and present in the UK for less than 16 days in the current tax year.Or you leave the UK to work abroad full time and you are present in the UK for less than 91 days and less than less 31 days working.
The new rules from 6 April 2013 now mean that an individual will be automatically resident in the UK for a tax year if, either/or:
The person spends more than 183 days in the UK in the current tax year.The person’s only home is in the UK (or has all his/her homes in the UK),The person works in the UK for 276 days.
These factors will automatically make a person UK resident for tax purposes. If the answer to all of the above is ‘No’ the Sufficient Test will need to be applied:
The Sufficient Ties Test
The Sufficient Ties Test is a way of measuring how many UK ties a person has and then using those ties to determine effectively how reliant on the UK that person remains, when the number of days that person spends in the UK is taken into account. For example, where a person has been non-resident for the previous 3 tax years, if they are in the UK for between 46 and 90 days they need 4 ties to make them resident, if they are in they are in the UK for between 91 and 120 days – 3 ties, 121 or more days – 2 ties.
An example of a tie is:
A Family Tie, whereby the person’s spouse or civil partner is in the UK, or a child under 16 who is seen for more than 60 days.Or a Work Tie – if the person works in the UK for at least 40 days, work being at least 3 hours per day
Although the SRT potentially provides greater certainty on residence status it is as important as ever to take appropriate professional advice to ensure a full understanding of the rules. It may be that you are planning to return to the UK after residing in Dubai or you may simply be unsure of yours or your spouse’s status, the way you have been taxed or if there is a risk you may be taxed in the future.
Please note that guidance here is for general information only and you should take specific advice in your particular circumstances.