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The government is proposing new rules that come to effect from 6 April 2013 that may put UK residence for tax purposes on a statutory footing, instead of counting on HMRC guidelines and case law. In principle this can be a sensible move and will provide certainty for anyone unsure at present whether they qualify as being non-resident in the united kingdom for tax purposes. Ki Residences Singapore Nevertheless the rules are complex and also have attracted some criticism for this reason.
Under the current rules you are resident in the UK if you spend 183 days or even more in the UK and you could be resident if you spend more than 3 months on average. Beneath the new rules you will see no more four-year average and when you spend more than 3 months in the UK in any tax year you will always be regarded as resident. As before, you have to be away from the united kingdom for a complete tax year in order to qualify as non-resident and each day counts to be a day on the UK when you are at midnight on that day.
However, the new law is normally designed to leave most people in exactly the same position as previously which means you are unlikely to find your position suddenly altered. It is crucial though that you understand the brand new test of residence and non-residence. There are three parts of the test that have to be considered in order. In other words, if you are definitely non-resident based on Part A, then you don’t have to consider parts B and C.
So, we think the majority of our clients ought to be still included in the provision partly A you are non-resident should you have left the UK to handle full-time work abroad and are present in the united kingdom for less than 91 days in the tax year and no more than 20 days are spent employed in the united kingdom in the tax year. Here though are the three elements of the test.
Part A: You’re definitely non-resident if:
You were not resident in the UK for the previous 3 tax years and within the UK for less than 46 days in the current tax year; or You’re resident in the UK in a single or more of the previous 3 tax years but within the UK for less than 16 days in the current tax year; or You have left the UK to handle full-time work abroad and provided you were present in the united kingdom for less than 91 days in the tax year and no more than 20 days are spent employed in the united kingdom in the tax year. Training covered by your employer and used the UK will be considered work and this will be taken from your 20 day working allowance.
Part B: You are definitely resident if:
You are present in the UK for 183 days or even more in a tax year; or You have only one home and that home is in the UK or have more homes and many of these are in the united kingdom; or You perform full-time work in the united kingdom.
Part C: If your situation isn’t described in Parts A and B you then need to compare the number of days spent in the UK against a small amount of clearly defined connection factors. These connection factors are as follows:
Family- your spouse or civil partner or common law equivalent (provided you aren’t separated from their website) or minor children are resident in the united kingdom. Accommodation – you have accessible accommodation in the united kingdom and makes use of it during the tax year (at the mercy of exclusions for some types of accommodation). Substantive work in the united kingdom – you do substantive work in the united kingdom i.e. more than forty days in the tax year but usually do not work full-time in the UK. UK presence in previous years – you spent more than 90 days in the UK in either of the prior two tax years and you spend more days in the UK in the tax year than in virtually any other single country.
These connection factors are then combined with day counting to determine whether you are resident or non-resident. There are two categories, arrivers and leavers.
If you weren’t resident in any of the previous three tax years – ‘Arrivers’:
Fewer than 46 days in UK: Always non-resident. 46 – 3 months: Resident if 4 or more connection factors. 91 – 120 days: Resident if 3 or even more connection factors. 121 – 182 days: Resident if 2 or more connection factors. 183 days or more: Always resident.
If you were resident in one or more of the three tax years immediately prior to the tax year in mind – ‘Leavers’:
Fewer than 16 days in UK: Always non-resident. 16 – 45 days: Resident if 4 or more connection factors. 46 – 90 days: Resident if 3 or even more connection factors. 91 – 120 days: Resident if 2 or more connection factors. 121 – 182 days: Resident if you can find 1 or more connection factors. 183 days or more: Always resident
When the Finance Bill is produced there might be some changes to the legislation and more detail may emerge, but there has been considerable consultation in fact it is sensible to prepare for the new rules now. If that is relevant to your situation you should take professional advice to be sure you don’t fall foul of the brand new legislation.