Budget 2013 – Statutory Residence Test (SRT)

From 6 April 2013, a new statutory residence test is to be introduced via the Finance Bill 2013 with a new definition for the tax status of individuals This follows an intense consultation which has been a grey area for advisors and HMRC alike, replacing all existing legislation, case law and guidance.

The SRT will apply to income tax, capital gains, inheritance tax for an individual but not national insurance. The SRT consists of:

  • automatic tests for non-residence
  • automatic tests for residence and a series of connection factors for those caught in between to determine status.

The new legislation will bring clarity over the treatment of income and gains earned by those who spend frequent periods abroad during the year. This is a welcome move given the increase in the ‘mobile workforce’.