Determination of Residency Position

An individual’s residency position in the UK is determined by the Statutory Residence Test (SRT).

The SRT is a complex set of rules, and considers days spent in the UK as well as connections with the UK in a tax year. The tests to be considered under the SRT are the ‘automatic overseas’ tests, the ‘automatic UK’ tests and the ‘sufficient ties’ test.

If an individual spends fewer than 16 days in the UK, they will be regarded as not resident. If they spend more than 183 days, they will be regarded as resident. Complexity arises when time is spent in the UK and overseas during a tax year. When this is the case, other factors need to be considered. These other factors are hours worked in the UK and overseas, place of home, available accommodation and location of direct family. It may also be necessary to consider the number of days spent in the UK and overseas in previous years.

Some forward planning will be required and a diary kept of UK and overseas days when reviewing residency. ‘Split year treatment’ may be available and this separates a tax year into periods when an individual is UK resident and not UK resident. An individual’s residency position has a direct impact upon the UK tax treatment of income received and any capital gains.

While not resident, an individual can only liable to UK income tax on UK source income. This could be income from the letting of a UK property. Capital gains arising on disposals made while not resident are generally not taxable in the UK. However, gains realised on the disposal of UK land and property remain subject to capital gains tax regardless of residency status.

There is sometimes confusion about the difference between residency and domicile. An individual is domiciled in the country that they consider to be their home. This is generally the country they are brought up in. Domicile status can change during an individual’s life, and they may choose to be domiciled in another country.

If you have any queries regarding residency matters and the application of the Statutory Residence Test to your circumstances, please get in touch.