New UK Tax Residency Rules

The UK’s new Statutory Residence Test is important for British expatriates who maintain ties with the UK. If it establishes that you are UK resident, you are liable to UK tax on your worldwide income and capital gains.

The UK’s new Statutory Residence Test came into effect on 6^th April 2013, and supersedes all previous law. This is important for British expatriates who spend time in and/or maintain ties with the UK. If the test establishes that you are UK resident, you are liable to pay UK tax on your worldwide income and capital gains.

To assess your residence status, you need to work through the following three tests in order. The time period referred to is always a UK tax year, and a day is counted if you are there at midnight.  

1)      Automatic overseas test

You are treated as not resident if you meet any of these conditions:

• You spend less than 46 days in the UK and were not resident in any of the previous three years.
• You spend less than 16 days in the UK and were resident in any of the three previous UK tax years.
• You work overseas full time, subject to certain conditions.

2)      Automatic residence test

You are treated as resident if you meet any of these conditions:

• You spend 183 days or more in the UK.
• Your only or main home is in the UK.
• You work full time in the UK for 365 days, subject to certain conditions.

3)      Sufficient ties test

Where your residence status is not determined under the first two tests, the third determines whether you are resident in the UK based on a combination of the number of days and ‘ties’ you have to the UK. The ties are: family; available accommodation; substantive work; more than 90 days in the previous two years and more time in the UK than any other country. There are specific definitions for each tie.

The new test provides much more certainty, but is not simple. This is a very brief summary of complex legislation. You also need to take the Spanish tax residency rules into account, and if necessary refer to the Spain/UK double tax treaty. Please contact your local Blevins Franks Partner for clarification of your situation. We have a deep understanding of both the Spanish and UK tax regimes and how they interact.

23 September 2013

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised and generalised; an individual is advised to seek personalised professional tax advice.