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Tolley publishes guide to statutory residency test

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7th Jun 2013
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New residence rules could have major financial implications for expats who spend some of their time in the UK each year. 

Residence and domicile are the two main factors that need to be considered when deciding whether, or to what extent, an individual is liable to tax in the UK. Accountants have long complained that residence rules are complicated and confusing. There have also been legal disputes over residency, one of the most-high-profile cases involving Robert Gaines-Cooper, a Seychelles-based billionaire.

In an effort to clarify matters the government has introduced a new statutory residence test to to determine whether an individual is classed as a UK resident for tax purposes.

Under the new test, which has applied since 6 April, an individual’s residence will depend partly on the number of days spent in the UK, but also on that person’s connections to the UK. The ruling will consider other factors, such as whether that person owns property or has business interests in the UK, or where that individual’s family is resident.

Both the split year and temporary non-residence rules will very frequently need to be considered, as well as the statutory residence test rules, in order to work out the taxpayer's position.

Confused? Don't worry. Tolley, a publisher of tax information, has produced a free guide on the new residency rules for AccountingWEB.

The guide includes a summary of the new statutory residence test, an explanation of the four "automatic" tests for UK residence (for example, if someone is present in the UK for 183 days or more or has a UK home), and "transitional" rules.

Since 6 April residence will be decided by applying a statutory test. These resources cover the differences between the Finance Bill 2013 version of the legislation published on 28 March 2013 and the version published on 11 December 2012. These resources also provides further detail of the statutory provisions with references to the guidance issued by HMRC on 8 May.

HMRC published an online residence indicator on 31 May 2013, which gives an ‘indication’ of a person’s residence position. However, this first version does not deal with the interactions between the statutory residence test and the split year and temporary non-residence rules - although this may follow in a later version, Tolley says.

The statutory residence test will come into effect following Royal Assent to Finance Bill 2013 and will have retrospective application from 6 April 2013. It will apply for income tax, capital gains tax, inheritance tax and corporation tax.

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