New UK tax residence legislation took effect from 6 April 2013. The new rules use various non-subjective factors to determine UK domestic residence status in the tax years 2013/14 onwards.
There is a summary of the main rules here:
https://www.linkedin.com/pulse/newsletter-2-michael-reason
There are tests known as automatic residence tests, sufficient ties tests and automatic overseas tests.
It is not necessary to apply either the automatic UK test or the sufficient UK ties test to an individual who falls within one of the automatic overseas tests because they are definitively non-resident for the tax year.
Also, it is also not necessary to apply the sufficient UK ties test to an individual who falls within one of the four automatic UK tests but meets none of the automatic overseas tests, because they are definitively resident for the tax year.
The tests are set out below in reverse order; Automatic UK, Sufficient ties and then finally the overriding one, Automatic overseas.
Automatic UK
An individual is UK resident for the tax year if none of the automatic overseas tests are met and the individual meets one of the following four (4) automatic UK tests below:
- They spend at least 183 days in the UK in the tax year.
- They have a home in the UK and are present there on at least 30 separate days in the tax year, and in a period of at least 91 consecutive days (part of which falls in the tax year) they either have no home abroad or they have one or more non-UK home(s) in which they are present for less than 31 separate days in the tax year. The days can be consecutive or intermittent for the 30-day count, and there is no time minimum for presence (so that a day is counted if there is one minute of presence in the UK home). If the individual has more than one UK home, each is considered separately for the 30-day and 91-day counts. In terms of the first limb of the test, that the individual has a home in the UK in which they are present on at least 30 separate days in the tax year, a day spent at the home is ignored if it falls in the period 1 March 2020 to 1 June 2020, the individual is present in the UK for ‘an applicable reason related to coronavirus disease’ and is resident in another jurisdiction in that tax year. Note that these days are excluded for the purposes of determining the individual’s residence in the 2019/20 tax year. The days can be excluded in 2020/21 only if the individual was non-resident in the 2019/20 tax year. Therefore, if the individual was UK resident in 2019/20, any days in 2020/21 that would fall into this provision are counted as presence in the UK home.
- They work in the UK over a period of at least 365 days (part of which falls in the tax year) in which there are no ‘significant breaks’ from UK work, and more than 75% of the days on which they do more than three hours’ work are days on which more than three hours are worked in the UK, and there is at least one day that falls in the period and in the tax year on which they do three hours’ work in the UK. This is described as full-time UK work (also known as FTWUK). A ‘significant break’ from UK work is a continuous period of at least 31 days during which there is no day on which there is more than 3 hours of UK work, or on which the individual would have done more than 3 hours’ UK work, but for being on annual, sick, parenting leave or emergency volunteering leave6. This means that residence by reason of full-time UK work can be avoided by a period of work abroad, but not by simply taking leave periods outside the UK. Note that in terms of ignoring emergency volunteering leave when determining if there has been a ‘significant break’, this only applies for the purposes of determining the individual’s residence in the 2019/20 tax year. The leave can be similarly ignored in 2020/21 only if the individual was non-resident in the 2019/20 tax year. The work test simply refers to working in the UK over a period of 365 days, which contrasts with the pre-6 April 2013 practice that differentiated between shorter UK work periods and those for two or more years.
- They die in the tax year and were UK resident under the automatic residence test in each of the three previous tax years (but the preceding tax year was not a split year), and their home was in the UK when they died, or they had more than one home and at least one of them was in the UK, and if they had a home overseas during all or part of the tax year they did not spend a sufficient amount of time there in the tax year. The individual spent a sufficient amount of time at their overseas home in the tax year if either: there were at least 30 days in the tax year when they were present there for at least some of the time (no matter how short that time), or they were present there for at least some of the time (no matter how short that time) on each day of the tax year up to and including the day on which they died. Note that the 30-day total refers to the aggregate days in the tax year, being either consecutive or intermittent. The reference to the individual’s presence at their home means at a time when it was their home. If the individual had more than one home overseas, each of those homes must be looked at separately to see if the 30-day requirement was met, and that requirement is then met if it is met in relation to each of them.
Sufficient Ties
The sufficient ties test only applies where an individual meets none of the automatic overseas tests and none of the automatic UK tests but they visit the UK and have one or more UK ties.
The test comprises two separate sliding scales that use the UK days and the individual’s UK ties in the tax year. The scale that applies depends on the individual’s UK residence status in the previous three tax years. Note that an additional UK tie (the country tie) applies to an individual who was previously UK resident.
A previously-resident individual (also commonly referred to as a ‘leaver’, but this term is not used in the legislation) can spend up to 15 days in the UK in the tax year without becoming resident, regardless of the number of UK ties that they have.
A previously non-resident individual (also commonly referred to as an ‘arriver’, but this term is not used in the legislation) can spend up to 45 days in the UK in the tax year without becoming resident, regardless of the number of UK ties that they have.
The sliding scale that applies to the tax year depends on the individual’s residence status in the previous three tax years.
the ties are:
- family
- accommodation
- work
- 90 day and
- country
| Individual not resident in UK in the three preceding tax years (‘arrivers’) | |||
| UK days | Residence status/UK ties | ||
| 45 or less | Non-resident | ||
| 45–90 | 4 ties = resident | ||
| 91–120 | 3 or more ties = resident | ||
| More than 120 | 2 or more ties = resident |
| Individual UK resident in any of the three preceding tax years (‘leavers’) | |||
| UK days | Residence status/UK ties | ||
| 15 or less | Non-resident | ||
| 16–45 | 4 or more ties = resident | ||
| 45–90 | 3 or more ties = resident | ||
| 91–120 | 2 or more ties = resident | ||
| More than 120 | 1 or more ties = resident |
Automatic overseas
There are five automatic overseas tests in FA 2013, Sch 45, Pt 1, paras 11–16 and an individual who meets any one of them is non-resident.
First auto o/s test, resident within 3 years. if you,
1. have been resident in the UK for one or more of the last three (3) UK tax years,
2. spent less than sixteen (16) days in the UK in the tax year, and
3. do not die in the tax year
Second auto o/s test, resident in none of the three previous tax years, the individual was
1. resident in the UK in none of the three previous tax years,
2. present in the UK for a maximum of fourty five (45) days in the tax year
Third auto o/s test, works sufficient hours overseas
- the individual works ‘sufficient hours overseas’,
- there are no ‘significant breaks’, in the current tax year, and
- they are present in the UK in the current tax year for no more than ninety (90) days
- of which no more than thirty (30) are days on which more than three hours’ UK work is done). This is described as full-time work overseas (or abroad) (also known as FTWA). Unlike the previous HMRC practice for full-time employment abroad, the legislation does not require the employment contract to cover the required period
Fourth o/s test, dies in the tax year
- the individual dies in the tax year, and
- spends no more than fourty five (45) days in the UK in the tax year and either
(a) was not resident in either of the two (2) previous tax years, or
(b) was non-resident for the preceding tax year and the tax year before that was a split tax year under Cases 1, 2 or 3
Fifth o/s test, dies in the tax year
- the individual dies in the tax year,
- spends no more than fourty five (45) days in the UK in the tax year and
- would meet the third automatic overseas test rules (full-time work abroad) if those rules were applied for the part-year up to their date of death, and either:
(a) was not resident in either of the two previous tax year because they met the third automatic overseas test (work abroad), or
(b) was non-resident for the preceding tax year because they met the third automatic overseas test (work abroad) and the tax year before that was a split tax year under Case 1