The latest revisions to the statutory residence test have caused a good deal of comment and it is hoped that areas of uncertainty will be resolved by the time it comes into force on 6 April 2013.
It is easy to get carried away with the UK Ties tests and to assume that the Automatic Tests will only apply in the most obvious cases. This may be unwise.
There is the Automatic Non Residence test. If you satisfy any of the conditions for this test, you will be conclusively non resident, whatever else may happen and you can forget all about the various connecting factors.
If you cannot satisfy the Automatic Non Residence test you have to consider whether you satisfy the Automatic UK Residence Test. If you satisfy any of these conditions you will be automatically UK resident without reference to any of the connecting factors. (However if you satisfy both the automatic tests, the non resident test takes priority).
One area of uncertainty relates to the new elements recently introduced into the Automatic UK Residence Test which could bite some people unexpectedly.
You will be automatically resident in the UK if you are here for more than 182 days during the tax year. That is no great surprise - everybody knows that. You will also be automatically resident here if you work full time in the UK, subject of course to various conditions.
The controversial area relates to whether you have a home in the UK and how long you spend here. What qualifies as a home is fraught with difficulty but we need not dwell on that for the moment.
The relevant test is that:
- you have a home in the UK for more than 90 days; and
- you are present at that home on at least 30 separate days during the tax year; and
- there is a period (part of which falls within the tax year) of 91 consecutive days throughout which you either have no home overseas, or if you do, you are present at that home on fewer than 30 separate days in the tax year.
So let us consider an Australian resident who has a home in Australia and a home in the UK. He comes to Europe in the summer and spends 31 days in the UK at various sporting events.
On his way to the UK he takes the opportunity to visit other parts of Europe and on the way home he stops off to visit friends in America. Let us assume that he leaves Australia on 10 July and spends 2 weeks getting to the UK; he spends 31 days in the UK and then spends 2 weeks or so going home, returning to Australia on 10 September.
Clearly (a) and (b) are met and the question is whether (c) is also met. Is there a period of 91 consecutive days throughout which he was present at his Australian home on fewer than 30 separate days in the tax year?
I think there is. The period 2 July to 30 September is a period of 91 days and during the period he is present in his Australian home for only 29 days. That would seem to make him UK resident on the Automatic UK Residence Test.
This result may be unexpected and troublesome because all his attention is likely to be directed to the various connecting factors and staying below the number of days on the chart. He would probably feel quite safe if the UK home is the only connecting factor because he may think he has up to 182 days before he would be regarded as resident. He would be surprised to find that all the stuff about UK ties is irrelevant because he will be caught by the Automatic UK Residence test.
However, there is another interpretation arising from the words "in the tax year" at the end of (c) above. It can be argued that the reference to "in the tax year" means that he will not satisfy this test if he spends 30 days in total at home in Australia during the tax year. That seems an unlikely interpretation as it would vitiate the need for considering the 91 day consecutive period at all - because if he is there for 30 days during the whole of the tax year, it would not matter about the 91 day period. If that is the intention, I hope it will be made clear in the final amendments to the legislation.