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New UK residence rules

Author: © PWT Advice LLP ( ) - 09/01/2013

The UK Government plans to introduce a new residence test. The aim originally was to bring these new rules into effect from 6 April 2012, but this has now been postponed to 6 April 2013. This is a summary of the current proposals, as amended by the draft legislation that was published in December 2012. It is possible the rules could be changed again before they come into force.

Statutory Residence Test

The statutory residence test (SRT) will be introduced for individuals (not companies) for tax purposes. This test will take into account both the amount of time spent in the UK and other ties with the UK. It will be harder to become non-resident on leaving the UK than to become resident on coming to the UK. Distinctions are made between:

The SRT will comprise 3 parts:

Part A (conclusive non-residence)

Individuals will be non-resident for a tax year if:

Part B (conclusive residence)

Individuals will be resident for the tax year if:

The UK home test is complicated. The UK home must have been owned for a period of more than 90 days and used for at least 30 days (separate or consecutive) in the tax year. In addition, the individual must, for a period of 91 consecutive days (some of which fall in the relevant tax year), have either no home abroad or have one or more offshore homes but have used none for more than 30 days during the tax year.

For the full-time work test, the employment in the UK must be for 365 days or more (with no significant break) and at least 75% of the days worked are in the UK. For these purposes, three hours work per day counts as a day’s work.

If both Part A and Part B can apply to the same person, Part A (non-residence) takes priority. So, for example, if the taxpayer has a UK home but spends less than 16 days in the UK in a tax year, the taxpayer will be non-resident.

Part C (sufficient ties test)

Where neither Part A nor Part B applies, individuals need to know how many ties they have with the UK. The ties are:

Once the taxpayer has determined how many ties exist, you then look at the number of days spent in the UK. Basically, the more ties there are, the less time can be spent in the UK without being tax resident.


Number of tiesMaximum number of days in UK (to be non-resident)
4 factors45 days
3 factors90 days
2 factors120 days
1 or no factors183 days


Number of tiesMaximum number of days in UK (to be non-resident)
4 factors15 days
3 factors45 days
2 factors90 days
1 factor120 days
No factors183 days


The general rule is that the taxpayer must be in the UK ‘at the end of the day’ (i.e. midnight) for the day to count towards the residence test. However a new anti-avoidance rule is being introduced, where the taxpayer:

Once these conditions have been fulfilled, any subsequent days spent in the UK without being present at midnight will count towards the residence tests.

Finance Act 2013 is expected also to include an anti-avoidance rule for certain investment income received by ‘temporary non-residents’. This matches an existing rule for capital gains tax. Where an individual:

the individual will be taxed on certain income received whilst temporarily non-resident. In particular, this will apply to dividends paid by closely controlled companies (e.g. with 5 or fewer shareholders).

Ordinary residence

The proposal is to abolish the separate concept of ‘ordinary’ residence. At present, individuals who are not ordinarily resident have some UK tax advantages, particularly if they are working partially in the UK and partially overseas. This is known as the ‘overseas workday relief’. The proposal is to have only one concept, of residence, but to bring in new laws to protect the overseas workday relief.

However the relief will now only be available for non-doms, who have not been resident in any of the 3 previous tax years, and who do not expect to be based in the UK for 3 years or more. Grandfathering will apply for anyone else currently relying on the exemption.

Transitional rules

The new definition will not apply retrospectively. This means the current rules (based on case law) will still apply for periods up to 6 April 2013. However there will be a limited transition provision where people need to know if they were resident in a previous year, in order to determine if they are resident after 6 April 2013.

This note is intended as a summary only. Please contact us if you require any advice on your UK tax liabilities.

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Please Note:
These articles were based on the legislation in force at the date of publication. The laws may well have changed since. These articles should not be taken as being or replacing proper legal advice.


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