UK ‘tax residence’ is generally a keystone in the overarching tax planning of individuals who have come to, or left, the UK, and yet the UK’s test of tax residence has always been notoriously uncertain, based mostly on a mixture of Court decisions and ‘guidance’ from HMRC.
In the summer of last year the Government issued a detailed Consultation Document proposing a new, statutory, residence test. The plan was for the changes to be implemented from April 2012.
As might have been expected, a multitude of difficult points that needed more careful analysis arose, so the Government wisely decided to defer the introduction of the test until April next year, 2013. This gives those who are affected time, over the autumn and early next year, to plan for how the new test will affect them.
The Government’s objective was that most individuals would find that the new test gave them the same answer as to whether they were UK tax resident as the old test did, but that with the new test it should be easier to arrive at a clear conclusion. They acknowledge, however, that there will be some people for whom that is not so. Where a person’s circumstances are complex or unusual it will be important to check they will still get the same answer as they did previously. If need be, individuals in this position can take steps to tweak the number of connection factors or ties that they have with the UK, to enable them to keep (or achieve) the residence status they desire.
Any changes to connection factors need to have been completed before the new rules come into effect on 6 April next year. So unless your tax residence status is straightforward it will be very important to check your position in good time, and if necessary to get planning under way: changes to an individual’s or family’s lifestyle take time first to identify and agree, and then further time to implement.