Clients often ask us for advice on either becoming UK resident or on what happens when a person leaves the UK and whether UK residence ceases on departure. In fact, since 6 April 2013, UK residence is determined by a statutory residence test, the basics of which are summarised below. If a person has spent time in the UK unexpectedly as a result of the Covid-19 pandemic it may be necessary to consider the relief under the statutory residence test for 'exceptional circumstances'. As the test is complex, you should always take appropriate professional advice to determine your residence status.
Am I UK resident?
You will normally be treated as UK resident in any tax year if you are physically present in the UK for 183 days or more in that year. In terms of counting days, this means you are physically present in the UK at midnight on 183 days or more.
However, there are some other ways in which you might be automatically treated as UK resident.
One of these is if you have your only home in the UK. What this means is that you have a home in the UK for and spend 91 consecutive days there (including 30 days in the tax year), whilst having no overseas home in which you spend a certain amount of time during the tax year.
Another way of being automatically UK resident is if you work full time in the UK over the course of the year, without significant breaks. The test for what constitutes 'work' is relatively broad and can even catch incidental duties.
If you don’t fit into any of the above categories, you may still be treated as UK resident if you meet what is known as the ‘sufficient ties’ test. This is set out in more detail below.
How do I become non-UK resident?
You will be automatically non-UK resident if you leave the UK to work full-time overseas.
If this doesn’t apply to you, you’ll be treated as automatically non-UK resident in a tax year if you limit the number of days you spend in the UK during that year. The threshold for meeting this test is very high and also depends on whether you’ve been UK resident previously.
If you’ve been UK resident in at least one of the three previous tax years you’ll need to limit your days in the UK to under 16 in the tax year in question. If you have not been UK resident in any of the three previous tax years, you’ll have to spend fewer than 46 days in the UK during the tax year to be treated as automatically non-UK resident.
The sufficient ties test
If you don’t fit into any of the above categories, your residence position will be determined by looking at the number of ‘ties’ you have to the UK. ‘Ties’ to the UK include:
- family members in the UK;
- accommodation in the UK;
- work in the UK; and
- more than 90 days spent in the UK in at least one of the two previous tax years.
If you are leaving the UK, you will also need to consider whether you have spent more days in the UK than in any other country during the tax year.
The number of ties you have will determine how many days you can spend in the UK without being treated as UK resident.
It is possible, in some circumstances, to split a tax year into a non-resident part and a resident part. This is helpful if you either arrive or leave the UK mid-way through a tax year (which runs 6 April – 5 April).
The most usual way for clients to claim split year treatment is if they (or their spouse or partner) leave the UK to start full-time employment abroad. If this is the case, this is a very valuable relief as it is possible to treat the year as divided into a resident part, where you are taxed on the basis of your UK residence, and a non-resident part, where you are taxed as a non-UK resident for most tax purposes. For those planning to leave the UK in a middle of a tax year (perhaps in a hurry), then this is often the best way to plan matters if it is possible to take up full time employment overseas.
Another way to claim split year treatment if you plan to leave the UK is if you cease to have a UK home at some point during the tax year. However, this is usually very difficult to achieve. From the point at which you cease to have a home in the UK (and this usually involves either selling the property or letting it to an unconnected third party), you must spend fewer than 16 days in the UK, and either become tax resident in another country within six months or have your only home in that country within six months.
As everyone’s situation is different, if you plan either to become UK resident or to leave the UK during the current tax year, you should take advice on your residence position as soon as possible in order to help you with managing your affairs effectively. Please contact us if you would like to discuss your specific situation and the planning opportunities which may be available to you.