UK Non Resident Tax
Will April’s New Tax Residency Status Test Affect You?
A new test is being launched in April to determine the residence status of a person for tax purposes. The test is aimed at expats who spend some of the year in the UK and has been designed to remove the grey areas that currently exist when determining someone’s residence status for tax purposes.
The existing residency test is being modernised, after consultations with HMRC, and, as a result of this modernisation, the rules which dictate whether or not a person is classed as a UK resident for tax purposes, are changing.
The current Statutory Residence Test (SRT) works on the basis that if you are in the UK for 183 days or more in a single tax year, or more than 90 days on average in a single tax year over the previous four tax years, you are a UK resident.
Although it hasn’t yet been finalised, it is thought that the new test will take different aspects into account when determining a person’s residency. These aspects are expected to include family, property, work and social connections
Expats who have been overseas for some time, or those in the UK who own homes overseas, may need to reconsider where they are liable to pay taxes as a result of the changes being made to the SRT. Those who may be affected are being urged to make themselves familiar with the new rules as soon as possible, seeking advice from financial advisers where necessary.
According toHMRC, the SRT is divided into three parts. First is a test to determine whether or not someone is ‘automatically non-resident’, then a test to decide If they are ‘automatically resident’, and if they do not fall into either of these categories, a sufficient ties test will be carried out. The sufficient ties test determines resident based on a combination of the time spent in the UK with the number of ties a person has. Ties to the UK would include family, property, employment and social connections.
Expats will be considered ‘automatically non-resident’ if they work full-time overseas or spend less than 46 days in the UK. This is reduced to 16 days if they lived in the UK for one or more of the three years preceding the test.
Expats would be considered ‘atomically resident’ if; they spend 183 days or more in the UK, have a home in the UK for over 90 days or work full-time in the UK.
Expats that consider themselves ‘non-resident’ may be considered ‘resident’ once the new regulations come into force.