UK Tax Residence, any clearer?

At present, an individual’s UK tax residence position is based on some limited statutory rules and a wealth of case law, established HMRC practice and published HMRC guidance.

We had previously anticipated a statutory residence test would come into force on 6 April 2012; see our commentary from last year. The ‘launch’ of these new rules was pushed back to 6 April 2013 while the government considered responses to their original proposals.

Draft legislation and guidance has now been published and whilst this is similar to the original proposals there are some welcome changes e.g. they now include transitional rules, thresholds have increased a little.

The basic framework of the draft legislation includes automatic tests for non-residence and residence, together with connection factors and day counting tests for individuals who are not automatically non resident or resident.

The proposals will give greater certainty over a taxpayer’s residency position and less scope for interpreting the rules.

It should also be noted that the concept of ordinary residence is being abolished, however ‘overseas workdays relief’ will be retained and written into statute.

If you would like to discuss how these proposals will affect your UK residency status please contact us for a consultation.