The government is proposing new rules which come to effect from 6 April 2013 which will put UK residence for tax purposes on a statutory footing, instead of relying on HMRC guidelines and case law. In principle it is a sensible move and can provide certainty for anybody unsure at present if they qualify as being non-resident in the UK for tax purposes. However the rules are complex and have attracted some criticism for this reason.
Under the current rules you are resident in the UK if you spend 183 days or even more in the UK and you also could be resident in the event that you spend more than 3 months on average. Under the new rules you will have no more four-year average and when you spend more than 3 months in the UK in virtually any tax year you will always be considered to be resident. As before, you have to be away from the united kingdom for a whole tax year to be able to qualify as non-resident and each day counts to be a day on the UK in case you are here at midnight on that day.
However, the new law is generally designed to leave most people in exactly the same position as previously which means you are unlikely to find your position suddenly altered. It is necessary though that you understand the brand new test of residence and non-residence. You can find three sections of the test that have to be considered in order. In other words, if you are definitely non-resident on the basis of Part A, then you need not consider parts B and C.
So, we think most of our clients ought to be still covered by the provision in Part A that you will be non-resident when you have left the UK to carry out full-time work abroad and so are present in the UK for fewer than 91 days in the tax year and no more than 20 days are spent working in the UK in the tax year. Here though will be the three elements of the test.
Ki Residences Singapore Part A: You’re definitely non-resident if:
You were not resident in the UK for the previous 3 tax years and present in the UK for under 46 days in today’s tax year; or You were resident in the UK in one or more of the previous 3 tax years but within the UK for fewer than 16 days in today’s tax year; or You have left the UK to handle full-time work abroad and provided you’re present in the UK for fewer than 91 days in the tax year no a lot more than 20 days are spent working in the united kingdom in the tax year. Training paid for by your employer and taken in the UK will be considered work and this will be taken from your 20 day working allowance.
Part B: You are definitely resident if:
You are present in the united kingdom for 183 days or even more in a tax year; or You have only one home and that home is in the united kingdom or have more homes and all of these are in the united kingdom; or You carry out full-time work in the UK.
Part C: If your situation isn’t described in Parts A and B then you need to compare the number of days spent in the united kingdom against a small amount of clearly defined connection factors. These connection factors are the following:
Family- your partner or civil partner or common law equivalent (provided you are not separated from them) or minor children are resident in the UK. Accommodation – you have accessible accommodation in the UK and makes use of it through the tax year (subject to exclusions for some types of accommodation). Substantive work in the UK – you do substantive work in the UK i.e. a lot more than forty days in the tax year but usually do not work full-time in the UK. UK presence in previous years – you spent more than 90 days in the united kingdom in either of the prior two tax years and you also spend more days in the UK in the tax year than in any other single country.
These connection factors are then combined with day counting to determine whether you are resident or non-resident. There are two categories, arrivers and leavers.
If you were not resident in any of the previous three tax years – ‘Arrivers’:
Fewer than 46 days in UK: Always non-resident. 46 – 90 days: Resident if 4 or more connection factors. 91 – 120 days: Resident if 3 or even more connection factors. 121 – 182 days: Resident if 2 or even more connection factors. 183 days or more: Always resident.
If you were resident in one or more of the three tax years immediately prior to the tax year under consideration – ‘Leavers’:
Fewer than 16 days in UK: Always non-resident. 16 – 45 days: Resident if 4 or even more connection factors. 46 – 3 months: Resident if 3 or more connection factors. 91 – 120 days: Resident if 2 or more connection factors. 121 – 182 days: Resident if you can find 1 or even more connection factors. 183 days or even more: Always resident
Once the Finance Bill is produced there can be some changes to the legislation and much more detail may emerge, but there has been considerable consultation in fact it is sensible to prepare for the brand new rules now. If this is relevant to your situation you need to take professional advice to ensure you do not fall foul of the new legislation.