Will you be treated as a UK resident for taxes? The Statutory Residence Test explained.

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Tax

MoneyPlus Features Team

2nd October 2015 at 3:15pm

In our recent blog on holding assets in the UK, we touched on the question that if you live abroad but still come back to the UK regularly – could you be considered to have UK residency?

It’s quite a tricky subject and we thought it might be worth singling out and expanding on.

Test and learn

The short answer is yes. The definition of residency within the UK was changed back in 2013 and it’s now about a combination of the number of days you spend in the UK in a tax year and your number of ties with the UK.

This is called the ‘Statutory Residence Test’ and it’s a complex area. It consists of three separate tests:

Test 1

You’ll be classed as automatically overseas if you were:

  • Previously a UK resident (any of the last 3 tax years) and spend a maximum of 15 days in the UK, or
  • Previously non-resident (all of last 3 tax years) and spend a maximum of 45 days in the UK; or
  • Work full-time overseas and spend no more than 90 days in the UK, of which a maximum of these will be 30 UK working days based on a 3 hour working day.

For those leaving the UK, the maximum days in the UK to be considered conclusively non-resident is 15 days. This should allow you to return to the UK for a two week period – perhaps as a holiday or to visit friends and family – without regaining UK residency.

Test 2

You are automatically have UK residency if you:

  • Spend 183 days or more in the UK in the tax year; or
  • Have a UK home for more than 90 days (this can straddle two tax years), and stay there at least 30 days in the tax year, and while you have a UK home they don’t stay at an overseas home for more than 30 days; or
  • Work full-time (at least 35 hours per week) in the UK (this can straddle two tax years) and more than 75% of working days are in the UK.

Test 3

The third test is ‘sufficient ties’ and looks at your links you might have to the UK.

You’ll be resident in the UK for a tax year if you don’t meet any of the automatic overseas tests but you meet the sufficient ties requirements. This is a tie-breaker test that only applies if neither of the previous tests proves conclusive. It includes a mix of day counting rules with ties that have been retained in the UK.

The UK ties are:

  • Family – if you have a spouse or civil partner or common law equivalent or minor children who are resident in the UK;
  • Accommodation – you have retained accessible accommodation in the UK and use it during the tax year;
  • Work in the UK – you work more than 40 days in the UK;
  • 90 day tie – you have spent 90 days or more in the UK in either of the previous two tax years.

And for those of you who have been UK resident in any of the three previous tax years there’s an additional test.

  • Country tie – you spend more days in the UK in the tax year than in any other country.

Check your connections

The number of days spent in the UK dictates the number of UK ties needed to be UK resident. HMRC looks at the number of connections you still have with the UK and then how many days you actually spend in the UK and for what purpose e.g. work, just visiting family, holiday etc.

The more connections you have the less number of days you need to be in the UK before HMRC will consider you UK resident:

Previously UK resident
(any of last 3 tax years)
Previously non-resident
(all of last 3 tax years)
Always non-resident <16 days <46 days
4 ties Up to 45 days Up to 90 days
3 ties Up to 90 days Up to 120 days
2 ties Up to 120 days Up to 182 days
1 tie Up to 182 days Up to 182 days
Always resident 183 days + 183 days +

So what does this mean?

Boiled down into its simplest terms – you need to be aware of your connections to the UK and how often you come over. If you’re unsure then you can get some government guidance on tax on foreign income here.

Join the conversation

Join the conversation and follow us on twitter @StandardLifeUK and Facebook and let us know any questions you may have after reading about UK residency.

This information is based on our understanding of taxation legislation and regulations in October 2015. The legislation and regulations can change. Your personal circumstances also have an impact on tax treatment.