View more on these topics

Status factors

Plans for a new definition of tax residence cover a combination of connection with time spent in the UK

Last week, I started to look at the consultation on the introduction of a full statutory definition of tax residence to take effect from April 6, 2012. Three types of residence status are proposed – conclusively non-resident (for example, fewer than 45 days in the UK in a tax year); conclusively resident, for example, UK presence for 183 days or more in a tax year; and neither conclusively non-resident nor conclusively resident.

The Government proposes that the following connection factors should be relevant to an individual’s residence status but only when linked to the amount of time the person spends in the UK.

Family – the individual’s spouse or civil partner or common law equivalent (provided the individual is not separated from them) or minor children are resident in the UK

Accommodation – the individual has accessible accommodation in the UK and makes use of it during the tax year (subject to exclusions for some types of accommodation)

Substantive work in the UK – the individual does substantive work in the UK (but does not work in the UK full-time)

UK presence in previous year – the individual spent 90 days or more in the UK in either of the previous two tax years

More time in the UK than in other countries – the individual spends more days in the UK in the tax year than in any other single country.

All these factors are a strong indication of where the centre of a person’s life is and all are relevant under current case law. Including these factors provides clarity on the residence status of individuals who “leave” the UK but keep their family and home here. These situations account for much of the uncertainty in the current rules.

These connection factors would be combined with days spent in the UK into a scale to determine whether the individual is resident or not.

It is proposed to have separate “scales” for arrivers and leavers, reflecting the principle that it should be harder for leavers to relinquish residence than for new arrivers to acquire it. These are described in detail below.

Two categories of individuals are specified. Each category is determined in relation to their resident status in the previous three years. With this in mind, consider these two categories and the applicable rules.

i: Individuals not resident in all of the previous three tax years (arrivers)

If the individual was not resident in all of the three tax years preceding the year under consideration, the following four connection factors may be relevant to their residence status, if they occur at any point in the tax year, namely the individual:

  • has a UK-resident family;
  • has substantive UK employment (including self-employment);
  • has accessible accommodation in the UK;
  • spent 90 days or more in the UK in either of the previous two tax years.

The way these connection factors are combined with days spent in the UK to determine residence status is as follows:

Days spent in UK – Impact of connection factors on residence status

  • Fewer than 45 days – always non-resident
  • 45-89 days – resident if individual has four factors (otherwise not resident)
  • 90-119 days – resident if individual has three factors or more (otherwise not resident)
  • 120-182 days – resident if individual has two factors or more (otherwise not resident)
  • 183 days or more – always resident

ii: Individuals resident in one or more of the previous three tax years (leavers)

If the individual was resident in one or more of the three tax years immediately preceding the tax year under consideration, the following connection factors may be relevant to their residence status, if they occur at any point in the tax year, namely the individual:

  • has a UK-resident family;
  • has substantive UK employment (including self-employment);
  • has accessible accommodation in the UK;
  • spent 90 days or more in the UK in either of the previous two tax years;
  • spends more days in the UK in the tax year than in any other single country.

The way these connection factors are combined with days spent in the UK to determine residence status is as follows:

  • Days spent in UK – impact of connection factors on residence status
  • Fewer than 10 days – always non-resident
  • 10-44 days – resident if individual has four factors or more (otherwise not resident)
  • 45-89 days – resident if individual has three factors or more (otherwise not resident)
  • 90-119 days – resident if individual has two factors or more (otherwise not resident)
  • 120-182 days – resident if individual has one factor or more (otherwise not resident)
  • 183 days or more – always resident

As stated above, the tax residence of the vast majority of individuals will not be affected by the introduction of the new statutory definition. As part of the consultation, the Government also sought views on options to reform the concept of ordinary residence, which currently lacks a statutory definition.

Recommended

Government under pressure over banking reform deadline

A member of the Financial Policy Committee is calling for the Independent Commission on Banking’s recommendations to be implemented within two years, describing the 2019 deadline as “irrelevant”. The ICB’s report recommended ringfencing retail banks, making them hold more capital and operate under a different set of executives. Writing in the Guardian, FPC external member […]

30

Bank advice misselling won’t stop until senior staff are punished

Last summer, the Which? Future of Banking Commission report made a number of sensible recommendations to try and improve the continued poor standards of bank advisers. In an evidence session earlier that year, FSA chief executive Hector Sants pledged to the commission that the regulator would get tough on banks who offer their customers poor […]

Euro was a “misguided experiment”, says Bolton

Fidelity fund manager Anthony Bolton says further political integration or a break-up of the euro is “still a few years away”. He says: “I have never been a fan of the euro and today we are fully exposed to all the risks of that misguided experiment. “Ultimately the politicians will have to decide between political […]

Harris Associates' view on the UK’s vote to leave the EU

By David Herro, Partner, Deputy Chairman, Portfolio Manager and Chief Investment Officer of International Equity at Harris Associates Britain’s vote to exit the European Union has led to significant uncertainty across global markets. We believe market impact of this uncertainty, though severe, is more of a shorter-term phenomenon which will provide an opportunity for long-term […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com