Individual Tax Residence
In 2013 the UK government has introduced new regulations for tax residence and introduced three tests to determine the tax residence position of individuals:
- Automatic Overseas Residents Tests
- Automatic UK Resident Tests
- Sufficient Ties Tests
When an individual qualifies as a non-UK tax resident under automatic overseas resident test they are not required to take the other two types of tests. If the position of the resident is unclear other tests will need to be referred to.
In order to qualify as a non-resident in the UK the individual should abide to following conditions:
- Individual residing in the UK for one or more of the 3 tax years spends less than 16 days a year in the UK
- Person residing in the UK for none of the 3 years preceding the years spends less than 46 days of the year in the UK
- Individual is working fulltime abroad for the year and spends less than 91 days of that year in UK and has less than 31 days a year in which he does more than 3 hours of work in UK.
This can refer to full time employment in one job or a combination of different jobs.
Under the Automatic UK Resident Tests the following rules are applicable:
- 183 days a year or more spent in the UK
- Owning only one home, which is located in UK
- Full time work in the UK for 276 days a tax year
To qualify under the Sufficient Ties Test you must have:
- Family ties
- Accommodation Ties
- Work Ties
- 90 days tie
- Country ties
The tax authorities
The tax authorities have clarified that in order to qualify for taxes under the Family tie option the individual must be a spouse, civil partner and children under 18 who are residents in the UK for the tax year. Children under 18 who are getting full-time education in the UK are treated as non-residents given that the time spent in the UK outside of the academic terms does not exceed 21 days.
A property will be considered an accommodation tie if it is available to be used as a residence for 91 consecutive days and the individual stays in it for one night a year.
If an individual works in UK either on continuous or sporadic basis for more than 40 days for at least 3 hours a day it is counted as a work tie. Different rules apply to individuals working in transportation.
The 90-day tie applies if the individual has spent over 90 days in the UK during the tax year coming before the year in question or the year preceding the tax year before the year in question or in both years.
With some limitations, the Split Year treatment can be made available for certain taxpayers. The recent changes made to the legislation do not allow to create artificial short periods of non-residency during which the individuals are free of UK and can bring income back to the UK.