Non-residence and “Full-time” employment overseas

HMRC show their hand…

It has been reported that HMRC have outlined proposals regarding their view on the meaning of individuals working “full-time” abroad as they seek to address the uncertainty around residency for UK tax purposes. So is this good or bad news for those seeking non-resident status?

Firstly, some context is required. A number of recent cases (Grace, Gaines-Cooper etc.) have established that an individual will need to make a “clean break” from the UK in order to claim non-UK resident status and have highlighted the lengths required to establish non-residence.

However, the bar is set lower for those who leave the UK to work full-time overseas: the “normal” 183-day and 91-day tests are still relevant but continued ties to the UK should be less problematic. In particular, available accommodation in the UK should not prejudice the position.

It is therefore important to understand what constitutes “full-time” work overseas. Worryingly, HMRC have been silent on this issue for some time and questions such as “Are infrequent business visits to the UK acceptable?” and “When do such visits become too regular?” have been left open.

HMRC have been under pressure to clarify matters and have now stated that they “…will generally accept that working in the UK for fewer than 10 days in a year will not by itself prevent an individual claiming they made a break with the UK because they are working full-time abroad.” So where does this leave us?

Importantly, there is now a threshold of UK workings days for people who want greater certainty around their residence position. However, there are many open questions such as:

  • What will the HMRC view be when an individual has 10 days or more UK workdays in a year?
  • What duties would be regarded as “incidental”, and not then count towards the 10-day “limit”?
  • Is the frequency of visits to the UK or their duration a more material factor?

In overview, while the HMRC announcement provides a helpful watershed in terms of full-time work overseas, residence more generally will continue to be a “grey” area while we await the long-overdue statutory residence test. Please click here if you would like to discuss UK tax residence with one of our specialist advisors.