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Govt proposes new statutory residency test

The Government has unveiled its plans to add a new annual remittance charge of £50,000 for non-doms resident in the UK for 12 years or more.

The current annual charge of £30,000 for non-doms living in the UK for seven years or more will continue to apply but the proposal, announced in the Budget, will increase the charge for those resident in the UK for 12 or more of the last 14 years to £50,000.

Paying the charge exempts the individual from UK taxes on overseas income and capital gains.

However, the consultation proposes extending that exemption to money remitted to the UK for certain investment purposes in an effort to encourage investment in UK businesses by non-doms.

In a separate paper, also released today, the Treasury is consulting on a statutory residency test to resolve uncertainty around what constitutes non-dom status.

Those not resident in the UK in all of the previous three tax years but present in the UK for fewer than 45 in the current tax year will be considered not resident, as will those resident in UK in one or more of the previous three tax years but present in the UK for fewer than ten days. Those who leave the UK to carry out full-time work abroad, providing they spend less than 90 days and fewer than 20 days working in the UK, will also be considered non-resident.

Individuals will continue to be automatically considered residents if the are in the UK for more than 183 days a year, work full time in the UK or their only home and their family is in the UK.

If these conditions do not confirm residency status, it is proposed individuals not resident in the UK in any of the previous three years be categorised “arrivers” while those who have been resident in one or more of the previous three tax year be categorised “leavers”.

Residency of both will be decided by the number of “connection factors” – including family residence and whether they have accessible accommodation in the UK – which apply to them. The number of factors which determine residency will depend on which category they are in and the amount of time they have spent in the UK in the current and previous tax years.

The paper admits that the status of the vast majority of people will not be affected by the test and that it will simply make residency status easy to discern.

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