Statutory Residence Tests – the new rules
From 6 April 2013 the rules determining if someone is resident in the UK for tax purposes have been put on a statutory basis known as the Statutory Residence Test (SRT).
The SRT is used to determine an individual’s status for income tax, capital gains tax and inheritance tax but not national insurance.
The SRT consists of a series of tests which include:
- an automatic test to determine non- residence; this looks at the position in the previous three years and the number of days present in the current year
- an automatic test to determine residence; this looks at where homes are based and whether there is a UK presence of more than 183 days in the current tax year.
If individuals are not deemed to be automatically resident or automatically non- resident as a result of these initial tests, further testing comes into play as follows:
- a test to determine sufficient UK ties which is split between ‘arrivers’ and ‘leavers’ and finally
- a day counting test, again split between ‘arrivers’ and ‘leavers’.
Sufficient UK Ties
If neither of the automatic tests determine the status, an individual’s UK residence status then depends on how many of the specified “UK ties” apply to them and how many days they spend in the UK in the tax year in question. The greater the number of UK ties that apply to the individual, the fewer the number of days they can spend in the UK without becoming UK resident.
The UK ties include:
– having a UK resident family (i.e. a child under 18, spouse, civil partner or person with whom the individual is living as spouse or civil partner)
– having substantive UK employment of more than 40 days in UK in a tax year
– having accessible UK accommodation
– being present in the UK for more than 91 days in either of 2 previous tax years
– country tie (applies to leavers only) – you spent more days in the UK than any other single country in the tax year.
Which UK ties are relevant depends on whether or not the individual was UK resident for any of the three tax years before the tax year in question.
When applying these rules, each tax year must be considered separately and the tests must be done in order. Once you meet an automatic test you do not need to consider any later tests.