In April 2013 there are new rules relating to tax residence that will come into force. Being non-resident can mean that you are not liable to UK Taxes, and for this reason the operation and application of tax law in this area is closely monitored by HMRC, and can often be the subject of huge dispute.
These rules are very complex, and the new rules do not overrule the operation of the old rules for periods before April 2013. In addition there are a number of other factors that need to be considered before determining your tax residence, so specialist advice is essential.
The following rules attempt to outline the basic principles that HMRC will apply in an attempt to determine tax residence.
Basic residence test
If you do not meet the above tests then you are NOT automatically non-resident.
Three classes of taxpayers
The Inland Revenue have now identified three types of taxpayer to whom the non-residence rules may apply.
Each of these categories has a day count that will (almost certainly) guarantee that a non-resident will not become UK Resident.
Full-times workers abroad
Individuals who have not been resident in all of the previous tax years
Individuals who have been resident in one or more of the previous tax years
Individuals who leave the UK to work abroad
Day count requirement
Must spend fewer than 45 days in the UK
Must spend fewer than 10 days in the UK
Must spend fewer than 90 days in the UK
Work days in addition to day count
Must spend fewer than 20 days working in the UK
The trick, however, is becoming non-resident in the first place. This usually requires a clean break from the UK, meaning at least 183 days outside the UK in any tax year, along with the acquisition of a home outside the UK.
The Inland Revenue may also look at various other factors when considering if an individual is resident, if they do not meet the day count requirements, based on a sliding scale using the following:
Is your family UK resident?
Do you have access to substantial employment in the UK?
Do you have access to accomodation in the UK?
Have you been resident for more than 90 days in the previous two years?
Do you spend more time in any other single country then you do in the UK?
As you may now appreciate, many people will be able to maintain non-residence simply by taking care over the amount of days they spend in the UK, but many more will undoubtedly fall into the grip more subjective tests into other factors, and this is where specific advice is essential.
It is expected that very many individuals claiming non-residence will be subject to examination by HMRC when the new rules start to operate, so you are advised to start your planning now, to ensure that do not inadvertently change your status.