17 June 2011

Welcome certainty - a statutory definition of tax residence in the UK


“…the residence rules are vague, complicated and perceived to be subjective. In certain circumstances it is not possible for a person to be sure whether they are tax resident in the UK or to know what activities or circumstances would make them tax resident. … Given that tax residence is an essential prerequisite for determining an individual’s tax liability, the Government agrees that this lack of certainty is unsatisfactory. It undermines its wider ambition of developing a tax system that is more certain, efficient, and easy to comply with. … It is also a deterrent to individuals and businesses looking to invest in the UK.”

With these words the Treasury launched its consultation on a new statutory test of what constitutes tax residency in the UK. The new test is designed to provide certainty for taxpayers in assessing their residency treatment. While this certainty will be welcomed, it does come at a price and some of the permissiveness of the current regime will be lost. For many individuals this will be a price worth paying. The new rules are intended to be introduced with effect from 6 April 2012.

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