Once upon a time, there was a rule that you could not exceed 90 days in the UK if you wanted to remain non-resident of the UK. However, a famous case which the Inland Revenue won against a Mr Gaines-Cooper in the Court of Appeal led to a change in the rules (from 2013 onwards). So although Mr Gaines-Cooper never exceeded 90 days, he had his children at school in the UK, a Chelsea season-ticket and other UK ties and he ended up paying over £30m in back taxes.
To avoid the clear unfairness that 90 days didn’t actually mean 90 days, the Statutory Residency Test was introduced to give more certainty. Now you can spend up to 183 days in the UK without becoming tax resident, albeit there are many conditions.
This article explains the rules to those who are not currently UK tax resident but frequently visit the UK. Forewarned is forearmed. Know the rules!
The Statutory Residence Test (SRT) is applied to each tax year. It is not a one off. Each tax year you could be challenged on whether you are a UK resident or not for that tax year. If you become resident then any income in that year and any shielding of capital gains from prior tax years could be at risk.
The process is simple, the interpretation is a little more difficult in some cases.
The process is as follows. You ask yourself the following questions:
- Are you automatically non-resident of the UK? The answer is YES if you meet any one of the following criteria:
- You were considered as a UK resident in one or more of the previous three tax years, but you spend fewer than 16 days in the UK in the current tax year
- You spend fewer than 46 days in the UK in the tax year AND you were non-UK resident in the preceding three tax years
- You work full time outside the UK and spend fewer than 91 days in the UK and you work fewer than 31 days in the UK for three hours or less in any given day.
- Are you automatically UK resident for tax year under consideration? The answer is YES if you meet any one of the following criteria:
- You spend more than 183 days in the UK in the tax year.
- You have a home in the UK and you spend a period of 91 consecutive days there, including 30 inside the tax year.
- You work in the UK for 365 days with no significant break. However, there are a number of calculations and requirements to fulfil, so please seek advice if you are concerned
- If you are not definitely resident or not definitely non-resident from the above tests in a particular tax year then you must consider the sufficient ties test. There are two tests – one targeting tax payers trying to leave the UK, and one targeting non-UK residents who return regularly to the UK who may inadvertently fall foul of the rules and become UK tax residents again. This article only considers the latter, non-residents who may become UK resident.
There are 4 ties to consider:
You have a family tie for the tax year under consideration if any of the following people are UK resident for tax purposes for that year:
- your husband, wife or civil partner (unless you are separated)
- your partner, if you are living together as husband and wife or as civil partners
- your child, if under 18-years-old (you will not be considered to have a family tie with a child who:
- is UK resident
- is under 18 years of age
- is in full-time education in the UK at any time in the tax year
- would not be a UK resident if the time they spend in full-time education in the UK were disregarded
- and spends fewer than 21 days in the UK outside term-time
You have an accommodation tie for a tax year if you have a place to live in the UK and:
- it is available to you for a continuous period of 91 days or more during that year and you spend 1 or more nights there during that year, OR
- it is at the home of a close relative, you spend 16 or more nights there during the year
- note that gaps of fewer than 16 days in the availability of the accommodation will count towards the continuous period of availability
- you have a place to live in the UK if you have a home, holiday home or temporary retreat in the UK, or other accommodation that you can live in when you are in the UK
Note also that an individual does not have to own the accommodation. Ownership, form of tenancy, or legal right to occupy the accommodation makes no difference.
Note also that accommodation is regarded as available to you for a continuous period of 91 days if you are able to use it, or it is at your disposal, at all times throughout that period. If a relative were to make their home available to you casually, for a social visit, say, it will not mean that the accommodation would be regarded as being available to you. However, if it is available to you for a continuous period of 91 days and you use it casually, it will be a tie.
Accommodation owned by an individual but which they have wholly let out commercially would not be considered as available to live in unless they retained the right to use the property or part of the property.
You have a work tie for a tax year if you do more than 3 hours of work a day in the UK on at least 40 days in that year (whether continuously or intermittently).
- Work takes its everyday meaning. If you are an employee, work covers the activities you carry out in the performance of your duties. If you are self-employed it covers the activities you carry out in the course of your trade, profession or vocation
- There are special rules about what constitutes 3 hours of UK work for people working on ships, planes and other transport style jobs
You have a 90-day tie for a tax year if you have spent more than 90 days in the UK in either or both of the previous 2 tax years.
- If you have the following number of ties, you can remain non-resident of the UK provided you spend no more than the maximum number of days as follows:
- nil or 1 tie – up to 182 days
- 2 ties – up to 120 days
- 3 ties – up to 90 days
- 4 ties – up to 45 days
There are also rules about what constitutes a day, the usual rule being a day counts as in the UK if you are in the UK at the end of that day.
These are the outline rules and should not be considered as professional advice. If you are in any doubt, you should seek professional tax advice.
To be 100% certain, buy or rent a property in Gibraltar from Chestertons and stay out of the UK!
Contributed by Mike Nicholls
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