Impact of the new residence tax rules

The new UK tax residence regime that applied from 6 April 2013 provides a lot more certainty than the old rules. But the changes are pretty sweeping.

Residence could be really important for your tax position, particularly affecting your liability to income tax and capital gains tax. The new rules on residence put you in one of three categories:

Definitely or automatically NON-RESIDENT:

• You have spent fewer than 16 days in the UK during a particular tax year after being resident here in at least one of the three preceding tax years.
• You have spent fewer than 46 days in the UK during the tax year in question and you have not been resident in the UK in any of the three preceding tax years.
• You work ‘sufficient hours overseas’ in the tax year with ‘no significant breaks from overseas work’. Furthermore, during the tax year in question you spend fewer than 31 days in the UK working more than three hours a day and you spend fewer than 91 in the UK altogether for any reason.

Definitely or automatically UK RESIDENT:

• You spend at least 183 days in the UK.
• You have a home in the UK and basically you stay there for at least 30 days, and you either have no overseas home or your visits there are minimal over a 91 day period.
• You work in the UK full time, with more than 75% of your working days in the UK.

NON-RESIDENT or RESIDENT in the UK: 
It depends how much time you spend in the UK and how many ties you have with the country.

• Family tie – a family member is resident in the UK
• Accommodation tie – you have available accommodation in the UK that you use
• Work tie – you work in the UK for at least 40 days a year
• 90 day tie – you have spent more than 90 days in the UK in either of the two previous tax years
• The country tie – this broadly depends on how much time you have spent in the UK in the previous three years.

The more ties you have, the fewer days you can spend in the UK before you will be treated as UK resident (and vice versa). The position is a bit tougher for a leaver than for someone who is arriving in the UK.

In this edition

This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The newsletter represents our understanding of law and HM Revenue & Customs practice as at 10 January 2014.