The statutory residence test

The government intends that the Finance (No 2) Act 2013 will define residence and abolish the concept of ordinary residence, thus bringing clarity to the area of statutory residence.

UK residence status is important in determining an individual’s liability to income tax, capital gains tax and inheritance tax. Residence is also important in many double tax conventions.

Until now, residence has not been defined in legislation, but has been based on practice contained in booklet IR20, followed by HMRC 6. Reliance on this guidance could produce surprising results and also relied upon the concept of ‘ordinary residence’, which was neither defined nor understood by many persons outside the UK.

The Finance (No 2) Act 2013 will define residence and abolish the concept of ordinary residence. The new statutory rules do not make much change to the previous practice, but are intended to clarify the situation. The abolition of ordinary residence also affects the rules relating to non-UK domiciled individuals.

The basic rule is that a person is resident in the UK for a tax year if the automatic residence or the sufficient ties tests are met for that year.

Sufficient ties

Because of the lack of statute law on the topic, there has been a wealth of case law to establish the meaning of the term ‘residence’. Residence denotes a degree of permanence and the judges have looked to a person’s way of life to establish this.

One of the significant cases in recent times has been Gaines-Cooper v HMRC [2008] STC 1665.

The new legislation looks at factors highlighted in the case, such as family life that links a person to the UK. So what counts as a ‘UK tie’?

If the taxpayer was resident in the UK for one or more of the three years preceding the relevant tax year, the following count as a UK tie:

  • a family tie (spouse or civil partner, child who is under the age of 18)

  • an accommodation tie (a place to live in the UK if that place is available for 91 days and the taxpayer spends at least one night there)

  • a work tie (if the taxpayer works there for at least 40 days)

  • a 90-day tie (the taxpayer has spent more than 90 days in the UK in:

    • the preceding tax year

    • the pre-preceding tax year or

    • each of those separately

  • a country tie: is in the UK at midnight and he spends the greater number of days in the UK. If he meets the same number of days in two or more countries, he has a country tie if one of those countries is the UK.

If the taxpayer was not resident:

  • a family tie

  • an accommodation tie

  • a work tie

  • a 90-day tie.

Split year treatment


Strictly speaking, a person is tax resident or non-resident for a complete tax year. Extra-statutory concession A11 provides that when an individual comes to the UK to stay for at least two years or ceases to reside in the UK to take up permanent residence abroad, liability to tax is computed by reference to the period of residence in the UK during the year. 

Leaving the UK

Days spent in UK

Impact of factors on status

Fewer than 16 days

Always non resident

16 to 45 days

Resident if person has four factors or more

46 to 90 days

Resident if person has three factors or more

91 to 120

Resident if person has two factors or more

121 to 182 days

Resident if person has one factor or more

183 days or more

Always resident

 

Arriving in the UK

Days spent in UK

Impact of factors on status

Fewer than 46 days

Always non resident

66 to 90 days

Resident if person has four factors or more

91 to 120 days

Resident if person has three factors or more

121 to 182 days

Resident if person has two factors or more

183 days or more

Always resident.

Further guidance is available on HMRC’s website.

To find out how Handley Evans & Co can help you with UK residence issues contact us

For information of users:
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.