Expats who revisit the UK are being urged to brush up on strict new rules over their tax residence status

The Statutory Residence Test was announced by the Treasury in the 2011 Budget and will be introduced on the 6th April to clarify the definition of a UK resident.

As part of the new Finance Bill, the three-part assessment will determine exactly how many days an individual can spend in the UK before having to pay its taxes.

The Treasury admits existing legislation has been “complicated and unclear”, with experts agreeing that conditions for residential status have been largely decided by court cases.

In 2011, millionaire businessman Robert Gaines-Cooper lost his appeal against HMRC’s decision to classify him as a UK resident. Judges ruled that the Briton, who had moved to the Seychelles, had not made a “clean break” from the UK because he still owned a property in Henley-on-Thames and had made trips to Ascot, among other reasons.

If two initial tests cannot ‘conclusively’ prove your residential status, a third may look more closely at your connections to the UK, such as family, property and work.

The definition of a UK tie will include staying in temporary accommodation with relatives (including siblings, grandparents and children) for at least 16 nights. Furthermore, if a property is available to you for more than 91 days, you may only stay there for one night before it is considered a British tie.

The test, part of a wider crackdown on tax avoidance, may also examine how much time you’ve spent in the UK in previous tax years.

In keeping with the current rules, anyone who is in the UK for 183 days or more in any one tax year, or more than 90 days on average per tax year over four years, is viewed as a resident.  This will also apply if you have a home in Britain for more than 90 days, visit it on 30 separate days and have a period of 91 consecutive days where you do not live in a home abroad for more than 30 days.

From April, some expats may need to correlate the number of days they spend in the UK with the number of British connections they have. Longer periods may require fewer ties if you want to be classified as a non-resident, with only one connection allowed if you spend over 120 days in the country.

Price Waterhouse Coopers says the legislation “represents the most significant change to the UK’s tax residence rules for over 100 years”. It advises expats to anticipate what days they’ll be in the UK during the next tax year and consider “an appropriate way” to record that time.

The firm also believes individuals should consider whether they have any control over a “range of connection factors” that could make them liable for tax after April, such as available accommodation, family circumstances, UK employment and self-employment.

A draft copy of the rules is available on the Treasury’s website (www.hm-treasury.gov.uk)

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