In a previous blog What Is UK Tax Residence, I made reference to the following article, The New UK Residence Rules, by Jon Golding ATT TEP. I have attached it below for your ease of reference.
The New UK Residence Rules
by Jon Golding ATT TEP
The current UK residence rules are based on days of residence in the UK and are relatively generous (91 and 183 day rules) compared to the proposed new rules due from 6 April 2013. So what are the proposed new rules which were revised recently and need we be worried?
Under the new rules you will not be resident in the UK for a tax year if you fall under any of the following conditions: you
- were not resident in the UK in all of the previous three tax years and you are present in the UK for fewer than 46 days in the current tax year; or
- were resident in the UK in one or more of the previous three tax years and you are present in the UK for fewer than 16 days in the current tax year; or
- leave the UK to carry out full-time work abroad (35 hours a week or more), provided you are present in the UK for fewer than 90 days in the tax year and no more than 20 days are spent working in the UK in the tax year.
Many of us British expats living abroad but flitting back to the UK will be classed as ‘leavers’ (resident in one or more of the three tax years immediately preceding the year of return) not ‘arrivers’ (not resident in all of the three tax years preceding the year of return). Leavers can only be in UK for less than 16 days above in a tax year to have absolute ‘certainty’ of non-residence. That’s hardly enough time to get over jet lag! ‘Arrivers’ must not have been UK resident in all of the three tax years preceding the year of return to the UK.
However, if you want more days in UK you must determine how many ‘connecting factors’ apply to you. For ‘leavers’ the five connecting factors simply put are:
1. UK resident family connections;
2. substantive UK employment (including self-employment);
3. accessible UK accommodation;
4. you spent 90 days or more in the UK in either of the previous two tax years;
5. you spend more days in the UK in the tax year than in any other single country.
Once your connecting factors are calculated you can apply them to the ‘leavers’ scale below for your classification of non-residence from 6 April 2013.
|Fewer than 16 days spent in UK – Always non-resident|
|16-45 days – in UK||Resident if you have 4 factors or more (otherwise not resident)|
|46-90 days – in UK||Resident if you have 3 factors or more (otherwise not resident)|
|91-120 days – in UK||Resident if you have 2 factors or more (otherwise not resident)|
|121-182 days – in UK||Resident if you have 1 factor or more (otherwise not resident)|
|183 days or more in UK – Always UK resident|
There is also a potential impact of UK residence for non-domiciled spouses on inheritance tax if they are deemed to be UK resident on a regular basis under the new rules. The new rules will be complex so you really need to plan for those UK visits or risk being declared UK resident and taxed accordingly. Is it time to start considering some changes to your yearly migration?
Jon Golding ATT TEP
Author: Sam Choong
Sam Choong is a lawyer practising in Penang, Malaysia. His areas of practice include estate planning, wills and UK inheritance tax for expats residing or seeking to retire in Malaysia.