The residence status of individuals for UK tax purposes
26th May 2014
In order to know whether or to what extent someone is liable to tax in the UK, it is important to know whether he or she is, or has been, resident in the UK for tax purposes. Since 6 April 2013 this has been governed by new statutory rules. This note aims to summarise some of the main features of those rules.
(For a discussion of the previous law, click here.)
(For a brief account of the law of domicile, click here.)
Various special rules apply where someone dies during a tax year. These are not discussed in this note.
Special rules also apply to certain people who work on vehicles, aircraft or ships and make cross-border trips. Again, these rules are not discussed in this note.
An individual is normally resident or non-resident in the UK for a whole tax year. Tax years for individuals run from 6 April till the following 5 April.
Structure of the statutory tests
In effect the rules must be considered in the following order:
- If an individual passes an “automatic overseas test” then he or she is not resident in the UK for the tax year concerned. In that case it is not necessary to consider the “automatic UK tests” or the “sufficient ties test”.
- If an individual does not pass any of the automatic overseas tests, but meets an “automatic UK test”, then he or she is resident in the UK. In that case it is not necessary to consider the “sufficient ties test”.
- If someone is not covered by the automatic overseas tests or the automatic UK tests, one must apply the “sufficient ties test”.
Automatic overseas tests
If an individual passes one of these tests then he or she is not resident in the UK for the tax year concerned.
Day-count tests
- Someone who has been UK resident in one or more of the three preceding tax years will be non-resident for a tax year if he or she spends less than 16 days in the UK during the year. This does not apply, however, if the individual dies during the tax year.
- Someone who has not been UK resident in one or more of the three preceding tax years is treated more generously. He or she will be non-resident for a tax year if he spends less than 46 days in the UK during the year.
The “full-time work abroad” test
During a tax year, in order to pass this test:
- The individual must work an average of 35 hours per week overseas. Various reductions may be made for annual leave, parenting leave and sick leave. Days on which the individual does more than 3 hours work in the UK, and work done overseas on those days, are ignored.
- There must be no significant breaks from overseas work.
- There must be no more than 30 days on which the individual does more than 3 hours’ work in the UK.
- The individual must spend less than 91 days in the UK.
Automatic UK tests
If an individual does not qualify as non-resident under an automatic overseas test, the next step is to consider the automatic UK tests. The main automatic UK tests are a day-count test, a home test and a full-time work test.
Day count
An individual who spends 183 or more days in the UK during a tax year is automatically UK resident for the whole tax year.
Home
An individual is automatically resident in the UK for a tax year if he or she:
- has a “home” in the UK at which he or she spends time (no matter how little) on at least 30 days in aggregate during the tax year; and
- either
- has no home overseas; or
- does not spend 30 days or more at any home overseas during the tax year.
Full-time work in the UK
An individual is automatically resident in the UK if over a period of 365 days, all or part of which falls within the tax year concerned:
- He or she works an average of 35 hours per week in the UK. Various reductions may be made for periods of leave and gaps between employments. Days on which the individual does more than 3 hours work overseas, and work done in the UK on those days, are ignored.
- There are no significant breaks from UK work.
- More than 75% of days on which he or she does more than 3 hours work are days on which he or she does more than 3 hours work in the UK.
At least one day of the 365-day period on which the individual does more than 3 hours work must fall within the tax year concerned.
Sufficient ties
Where none of the automatic overseas tests or automatic UK tests apply to an individual, one must apply the “sufficient ties tests”. The more ties an individual has with the UK, the smaller the number of days spent in the UK during a tax year that will trigger tax residence.
The relevant UK ties are as follows:
- Family: a member of the individual’s “family” is UK resident;
- Accommodation: the individual has accommodation in the UK available for his or her use;
- Work: the individual performs more than three hours work in the UK on 40 or more days in the tax year;
- 90 days: the individual spent more than 90 days in the UK in one or both of the two preceding tax years.
In addition, if someone has been UK resident in one or more of the three prior tax years, there is a fifth potential tie—namely that the individual has spent more midnights in the UK in the tax year concerned than in any other country.
For someone who has not been UK resident in one or more of the three prior tax years the day counts which result in residence are as follows:
- 4 ties: 46-90
- 3 ties: 91-120
- 2 ties: 120-182
If someone has been UK resident in one or more of the three prior tax years, the day counts which result in residence are more stringent:
- 4 or more ties: 16-45
- 3 ties: 46-90
- 2 ties: 91-120
- 1 tie: 121-182
“Family” includes spouse or civil partner and children aged under 18. Those living together as spouses are also covered; on the other hand separated spouses are excluded. In some cases children under 18 in the UK may not count as a family tie.
“Accommodation” means something different from “home”. An individual has an accommodation tie if he or she has a place to live in the UK and that place is available to him or her for a continuous period of at least 91 days. Accommodation does not give rise to the accommodation tie unless the individual spends at least one night there in the tax year. Accommodation owned by the individual’s parents, grandparents, siblings, adult children and adult grandchildren is disregarded unless the individual spends at least 16 nights there in the tax year.
Days spent in the UK
An individual does not normally count as present in the UK on a day unless he or she is present at the end of the day—i.e. at midnight.
A midnight in the UK can, however, be disregarded if
- the individual is in transit and does not engage in activities unrelated to his or her passage through the UK; or if
- the individual would not have been present in the UK but for “exceptional circumstances” beyond his or her control (the number of days in a tax year that can be disregarded on this basis is limited to 60).
There is also a “deeming rule” which applies where an individual:
- has at least 3 UK ties; and
- was resident in the UK for at least one of the three preceding tax years.
Under this rule, if there are days when the individual is present in the UK at some point in the day, but not at the end of the day, then after 30 such days have been reached the individual is treated as present in the UK on subsequent such days. (These additional days are ignored, however, in deciding whether the individual has a 90-day tie that might itself trigger the deeming rule.)
Split years
As already noted, individual residence is determined by tax years. In certain circumstances years of arrival and departure can be split: this is done by disapplying specified charging provisions in the non-UK part of the year.
The cases covered by the special rules are:
- starting full-time work overseas;
- the partner of someone starting full-time work overseas;
- ceasing to have a home in the UK;
- starting to have a home in the UK only;
- starting full-time work in the UK;
- ceasing full-time work overseas;
- the partner of someone ceasing full-time work overseas; and
- starting to have a home in the UK.
Ordinary residence
As well as residence, UK tax law used to use a concept of ordinary residence. With effect from 6 April 2013 this was phased out, although there are various transitional rules.