The UK Statutory Residence Test (SRT)

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The UK Statutory Residence Test (SRT)


Background


New UK statutory rules now apply with regards to when an individual is to be considered UK resident from 6 April 2013. These are the new UK Statutory Residence Test (SRT) rules.

The legislation for the SRT was finalised in the UK budget on 20 March 2013.

This article has been prepared to provide you with a summary of the SRT and to make you aware of the factors that you need to consider when assessing whether or not you are considered UK resident.


The SRT


The SRT will determine whether or not an individual is resident in the UK in a tax year for the purposes of UK income tax, capital gains tax and inheritance tax.

There are three tests to determine whether an individual is resident in the UK: (a) the ‘automatic overseas test’; (b) the ‘automatic residence test’; and (c) the ‘sufficient ties test’.

If an automatic overseas test is met then you are not UK resident.

If none of the automatic overseas tests are met then an individual is UK resident if he/she meets one of the automatic residence tests; or he/she meets the sufficient ties test together with the relevant number of days spent in the UK.

Please note that the sufficient ties test is only considered if the individual is not caught by the automatic overseas or automatic residence tests.


The Tests


(a) Automatic Overseas Test:


If an individual meets any of the following conditions he/she will be automatically treated as not resident in the UK:

  • Not resident in the UK for the previous 3 tax years and less than 46 days spent in the UK in the current tax year; or

  • Works overseas full time, and spends less than 31 days working in the UK for more than 3 hours each day and less than 91 days in the UK in the tax year in total.

(b) Automatic Residence Test:


If an individual does not meet any of the automatic overseas tests, he/she will be automatically treated as UK resident if any of the following conditions are met:

  • 183 days or more spent in the UK; or

  • He/she has a UK home available to them for more than 90 days, and uses it on at least 30 separate days, and has no overseas home or spends fewer than 30 days in the overseas home; or

  • He/she carries out full time work (35 hours a week) in the UK for a continuous period of 12 months and no more than 25% of the duties are carried on outside the UK during the period.

(c) Sufficient Ties Test:


If an individual does not meet any of the conditions of the automatic overseas and automatic residence tests, he/she must consider the sufficient ties test together with the number of days spent in the UK. The Ties to the UK:

  1. Family – the individual’s spouse/civil partner/common law partner or minor children live in the UK. Time spent by the minor children (under 18 years of age) in the UK to attend full-time education is ignored as long as the child does not spend more than 21 days in the UK outside of term time.

  2. Accommodation – the individual has ‘a place to live’ in the UK which is available to them for a continuous period of at least 91 days in the tax year, and at least one night is spent there. If the accommodation belongs to a close relative, the threshold is 16 or more nights spent there in the tax year. ‘A place to live’ includes a holiday home and a property not owned by the individual.

  3. Work – the individual works more than 3 hours a day in the UK for an aggregate of at least 40 days in that tax year.

  4. 90 day – the individual spent 91 days or more in the UK in either of the two previous tax years.

  5. Days in the UK No. of ties makes you UK resident
    46-90 days 4
    91-120 days 3
    121-182 days 2

    You will note that the more ties an individual has with the UK the less time he/she can spend there without becoming UK resident.

Days spend in the UK


You are considered to have spent a day in the UK if you are there at the end of the day, i.e. a midnight in the UK. The two exceptions to this rule are:

  • Overnight in transit through the UK (but must not carry out work activities); or

  • Exceptional circumstances (war, natural disasters, illness, injury - limited to 60 days).

Working in the UK


You are considered to be working in the UK if you are being paid for the trip to the UK and the time spent in the UK is for the performance of your employment duties, e.g. attending meetings, conferences or training courses; and/or you are reimbursed for business related expenses, e.g. travelling and subsistence costs which are tax deductable expenses.

Work performed whilst travelling to or from the UK is always considered as overseas work.


Summary


It is imperative that you keep good records of your travels to the UK to justify your non-UK resident status. The onus is on you as the tax payer to provide evidence should you ever have a challenge from HMRC on your non-UK resident status. The SRT flow diagram provides a summary of the key points within this article.

This article is based on the assumption that an individual has not been UK resident for the previous 3 tax years. However, if your circumstances are different please contact us to discuss matters further and more specific to your situation, as there are additional rules if you have left the UK in the previous 3 tax years.


If you have any queries or would like to discuss your tax situation please contact:


Dennis McGurgan



This article has been prepared from the UK Governments announcements, guidance and legislation and could be subject to revision. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Grant Thornton Limited, its directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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