Chapter 36 The statutory residence rules Flashcards
statutory residence test and the automatic overseas test
As a general rule taxpayer who are resident in the UK in a tax year are taxable on their worldwide income and capital gains arising in that year and taxpayers non resident in the UK in a tax year are only taxable on their UK income that year. this is subject to certain exemptions. If an individual is UK tax resident, they can be a Welsh or Scottish taxpayer if they have a close connection to those countries.
Statutory residence test – determines if an individual is UK or non UK resident. It has three steps the automatic overseas test (if any of these tests are met, the individual is non-resident for the tax year), the automatic UK tests (if any of these tests are met, the individual is UK resident for the tax year) and the sufficient ties test.
The automatic overseas test – an individual is not resident in the UK for a tax year if they meet any of the following tests:
• They were UK resident in one or more of the previous three tax years and they are present in the UK or fewer than 16 days in the current tax year
• They were not resident in the UK in all of the previous three tax years and they are present in the UK for fewer than 46 days in the current tax year
• They meet the work abroad condition if they work full-time (at least 35 hours a week) overseas for the tax year, they have no significant breaks from overseas work (at least 31 days), they spend fewer than 91 days in the UK in the tax year and they have less than 31 workdays in the UK in the tax year (a workday is any day on which the individual works more than 3 hours).
the automatic UK tests
The automatic UK tests – an individual is resident in the UK for the tax year if they meet any of the following tests:
• They are present in the UK for 183 days or more in a tax year
• They are a UK home
• They work full-time in the UK
An individual has a UK home if:
• There is a period of at least 91 consecutive days, at least 30 of them fall in the tax year, when
• The individual has a home in the UK in which they spend at least 30 days in the tax year and either
• Have no overseas home or they have one or more overseas homes but during the tax year they are present in each of those homes for fewer than 30 days
Full time UK work is classed as:
• Working full time in the UK for any period of 365 days (at least 35 hours a week)
• They have no significant breaks from the UK work (31 days)
• More than 75% of the workdays during the 365 period are UK workdays and at least one UK workday falls in both the 365 day period and in the tax year.
The sufficient ties test
The sufficient ties test – there are five possible ties:
• Family – a tie is created when either the individual’s spouse is UK resident or a minor child (under 18) of the individual is UK resident and the individual sees that child at least 61 days in the tax year.
• Accommodation – the individual has a place to live in the UK and it is available to them for a continuous period of at least 91 days and they either spent at least 1 night there or spend at least 16 nights there if it is the home of a close relative
• Work – a work tie is created if the individual has at least 40 UK workdays in the tax year
• 90 day tie – this is created if the individual spent more than 90 days in the UK in either or both od the previous two tax years
• Country – a country tie is created when the individual is present for the greatest number of days in the tax year. the country tie only applies to individuals who have been UK resident in one or more of the previous three tax years.
The number of ties an individual has is considered along the days they spend in the UK. If the individual has been resident in one or more of the previous three tax years. If they spent between 16 – 45 days in the UK 4 ties are needed, if they spent 46-90 days, they need at least 3 ties, if they spent 91-120 days, they need at least 2 ties and if they spent over 120 days, they need 1 tie. If they individual was not UK resident in the previous 3 tax years, if they spent 46-90 days, they need 4 ties, 91-120 days at least 4 ties, over 120 days they need at least 2 ties.
split year treatment
Split year treatment – if an individual arrives in or leaves the UK during the tax year and the circumstances meet the following criteria, the tax year is split into a UK part for which the individual is taxed as UK resident and an overseas part for which the individual is taxed as a non-resident. A tax year will be split if the individual is UK resident for that year under the SRT and the circumstances fall within any of the 8 cases. If the individual is non-resident for the year, the split year rules do not apply, in this case the individual will be non-resident for the whole of the tax year. the cases are:
• Case one – starting full time work overseas
• Case two – the partner of someone starting full time work overseas
• Case three – ceasing to have a home in the UK
• Case four – starting to have a home in the UK only
• Case five – starting the full-time work in the UK
• Case six – ceasing full-time work overseas
• Case seven – the partner of someone ceasing full-time work overseas
• Case eight – starting to have a home in the UK
