The new statutory test for individual tax residence in the UK (referred to as the SRT) has taken a long time coming but the new test is now almost in its final form and due to come into force from 6 April 2013.


In June 2012 the Government set out its responses to the detailed consultation document issued in June 2011 and also published a first draft of the legislation to implement the SRT. Revised legislation for inclusion in Finance Bill 2013, together with draft guidance from HM Revenue & Customs (HMRC), was published in December 2012.

The form of the new SRT remains broadly the same as that formulated in the summer and detailed in our briefing notes in August last year. The Government has listened to the points raised during the consultation period and some minor helpful amendments have been made to add clarity to the test. Some tightening of the rules will affect individuals in limited circumstances.

Although the exact final form of the legislation may not be known until the Finance Bill receives Royal Assent (which may not be until July 2013), the structure and detail of the test are now sufficiently well advanced that those who are keen to establish their residence or non residence status can start to plan or (for those who have been actively following developments) continue to plan for the future based on the new SRT.


There is currently no statutory definition of ‘residence’ for UK tax purposes and it has been left largely to the Courts to give meaning to the expression. Current guidance issued by HMRC assists in some cases but often it is impossible to confirm with certainty whether or not an individual is resident in the UK.

The SRT is a significant improvement as it will limit and define the factors that may be taken into account when determining an individual’s residence status. It is not above criticism, however, and some individuals may still find it difficult to be absolutely certain of their resident status.

Although the SRT is to replace all existing legislation, case law and guidance from the tax year 2013/2014 onwards (ie as from 6 April 2013), the current rules will generally continue to apply to determine residence in relation to tax years before 2013/2014.

The SRT will apply not only for income tax and capital gains tax purposes, but also for inheritance tax (where extended UK tax residence creates a deemed UK domicile)


When applying the SRT, the first step will be to confirm whether the individual is:

  • an Arriver (someone who was not UK resident in all of the previous three tax years); or
  • a Leaver (someone who was UK resident in one or more of the previous three tax years).

In order to apply the SRT for the tax year 2013/2014 it will be necessary to determine whether the individual was resident in any of the previous three tax years (ie 2010/2011, 2011/2012 and 2012/2013).

A transitional rule is to be introduced to allow an individual to elect to apply the SRT to one or more of the tax years before 2013/2014 for the purposes of ascertaining whether or not certain elements of the new tests are met.


The SRT will consist of two tests, one of which is subdivided:

  • the automatic residence test, which will show, in appropriate cases, that an individual is either:
  • automatically non-UK resident; or
  • automatically UK resident; and
  • the sufficient ties test for more complex cases.


Individuals will definitely not be resident in the UK for a tax year under the SRT if they satisfy one of the three automatic overseas tests:

  • they are Leavers and are present in the UK for fewer than 16 days in the tax year;
  • they are Arrivers and are present in the UK for fewer than 46 days in the tax year; or
  • they leave the UK to carry out (or to accompany a spouse or civil partner who leaves to carry out) full time work abroad, provided that they are present in the UK for less than 91 days in the tax year and less than 31 days are spent working in the UK in the tax year.

This ‘less than 31 days’ limit is an increase of 10 days from the June 2012 proposals although, as noted below, the number of hours that can be worked before a day becomes classed as a day spent working in the UK remains at the originally proposed level of three hours.


Individuals will definitely be resident in the UK for a tax year if they satisfy any one of the automatic UK tests, as follows:

  • they are present in the UK for 183 days or more in the tax year;
  • they have a home in the UK for a period of more than 90 days and are present in that UK home on at least 30 days in the tax year; or
  • they carry out full time work in the UK.

For the purposes of the ‘home in the UK’ test there are detailed rules where an individual has more than one home in the UK and/or one or more overseas homes.

The original draft legislation contained no proper definition of what will constitute a ‘home’ for these purposes. The Government has resisted calls to include a definition but has now included a provision in the legislation that a place used as nothing more than a holiday home or ‘temporary retreat’ does not count as a home for these purposes.


The two automatic residence tests will not provide an answer for a high proportion of international individuals with more complex affairs. Such individuals will have to consider whether the sufficient ties test is met for the particular tax year in order to confirm whether or not they are resident in the UK.

If an individual needs to apply the sufficient ties test they will need to measure the number of days they spend in the UK against a small number of defined ties with the UK.

The way in which the UK ties are combined with days spent in the UK to determine the individual’s residence status in the tax year is set out in the following box.

Click here to view table.


UK ties are:

  • a UK resident family (ie a spouse, civil partner or common law equivalent resident in the UK and/or minor children resident in the UK where certain conditions are fulfilled);
  • accessible accommodation in the UK where use is made of it during the tax year (subject to exclusions for some types of accommodation);
  • substantive UK employment including self-employment (ie if working in the UK for 40 or more days in the tax year but not working in the UK full time);
  • spending more than 90 days in the UK in either of the previous two tax years; and
  • (for Leavers only) spending more days in the UK than in any other single country in the tax year.


A child will not be treated as being resident in the UK for these purposes if their residence is mainly caused by time spent at a UK educational establishment and the child spends no more than 20 days in the UK outside term time. Helpfully, it has been agreed that half term and exeat breaks will count as being within term time for these purposes.

A child under 18 who is resident in the UK will only count as a connection factor for the parent if the parent, whilst in the UK, spends time with them (one to one, or with others present), or lives with them, for all or part of at least 60 days during the tax year.

The term ‘child’ includes both natural and adopted children but does not include stepchildren (unless they have been adopted).


An individual will have UK accommodation if:

  • they have a place to live in the UK;
  • it is available to be used by them for a continuous period of at least 91 days in a tax year; and
  • they spend at least one night in that place during the tax year.

There is, however, an exception for stays of less than 16 nights in the home of a close relative (other than the individual’s spouse, partner or minor children).


A tie will be taken into account if it occurs at any point in the tax year. As a general rule there is no split year treatment if a tie is gained or lost during the tax year. Individuals who wish to lose a tie in order to avoid it affecting their residence status in 2013/2014 may need to take action in the current tax year ie before 6 April 2013.


When individuals count the number of days they have been in the UK during a tax year, they will need to include all those on which they have been in the UK at midnight at the end of the day. There is a transit exemption for days when an individual arrives as a passenger in transit and departs the following day without engaging in any activity (in particular business) that is substantially unrelated to their passage through the UK.

The latest draft legislation does, however, contain a new anti-avoidance provision that will apply to those with strong ties to the UK who are present in the UK at any time for more than 30 days (without being present at midnight). This provision will apply when determining the number of days they are in the UK for day counting purposes.

There is to be a disregard for days spent in the UK (up to a maximum of 60 days in any tax year) owing to exceptional circumstances such as a sudden or life-threatening illness or injury (of the individual or a spouse, civil partner or dependent child) or national or local emergencies such as civil unrest or natural disasters.

Unhelpfully, there is a different test for what ‘day’ means for the purposes of counting days spent working in the UK, which is of particular importance for those who leave the UK to take up full time work abroad. Last summer the Government consulted on two options relating to working days, either to increase the number of hours that constitute a working day or, alternatively, to increase the number of working days in the UK from 20 to 25.

It has now decided to increase the number of working days in the UK from 20 to 30 and the number of hours that constitute a working day will remain at the originally proposed three hours (an increase to five hours was being considered).

One key issue with the new SRT has been what will constitute ‘work’ for the purposes of a working day. Business travellers will need careful advice and to take particular care with the amount of work they do when in the UK. It is, for example, now clear that time spent in the UK on work related travel will generally be classed as work even if no actual work (in the form of taking calls or answering emails, for example) is actually undertaken during that time.


The current concessionary ‘split year’ treatment will be placed onto a statutory footing as part of the new SRT. From the commencement of the new rules a tax year will be split into periods of residence and non residence for those arriving in the UK or returning after a period of time abroad, and also for those leaving the UK, provided certain conditions are met.


The common law concept of ‘ordinary residence’ is to be removed save in respect of one particular relief (overseas work day relief). This may have a disadvantageous effect for some individuals, notably UK resident and domiciled individuals who, by virtue of being not ordinarily resident, are currently eligible for the remittance basis on non-UK income. A transitional rule will be introduced for the two tax years following the commencement of the new rules.


There is no doubt that the proposed SRT will provide more certainty than is currently the case, and that it is a step in the right direction. That said, it still does not adequately recognise the extent to which modern work and lifestyle patterns can be very mobile and too much complexity remains. Internationally mobile individuals will need to tread carefully to ensure that a change in their lifestyle (in a way they would never normally consider to be a tax matter) does not inadvertently add an additional UK tie which makes them resident in the UK.