A new set of rules defining residence in the United Kingdom have been introduced with the 2013 Finance Act, to worry, intrigue, and mystify us. These rules provide a legal definition of residence called the Statutory Residence Test. Supposedly, it is designed to bring clarity to those amongst us who spend time in the UK but who do not want to be classified by Her Majesty’s Revenue and Customs as resident.
Residence must not be confused with domicile, which as far as the UK is concerned is a common law concept (i.e. defined by English Judges). Under Swiss federal law, possession of a permit C by a foreigner is substantial evidence to support a Swiss domicile claim. Under English law, a child at date of birth acquires the domicile of his/ her father (not mother). That domicile will be lost if when the child has grown up, moves to another country, lives there for an extended time, intends to stay there permanently, while at the same time severing links with his/her father’s country of domicile.
That made crystal clear, how then does the Statutory Residence Test apply to those of us who are resident in Switzerland, possibly work, and have children, parents, relatives in the UK, and visit them often. Here goes!! – There are three sections- PARTS A ,B, C.
If you were NOT resident in the UK in all of the previous 3 years and visited the UK fewer than 45 days in the current tax year – NON RESIDENT
If you were resident in the UK for 1 year or more of the previous 3 years and you were present in the UK for fewer than 10 days in the current tax year – NON RESIDENT
If you are in full time employment in Switzerland and you visit the UK fewer than 90 days in any tax year, and additionally, spend no more than 20 days in the UK on business – NON RESIDENT
If PART A does not apply specifically to you, then possibly PART B applies:
Have you been present in the UK more than 183 days in the current tax year – RESIDENT
Have you only 1 home and that home is in the UK – RESIDENT
Do you carry out full time work in the UK – RESIDENT
That all seems common sense and probably PART B will not apply to most of us. BUT before you think that all this is straightforward, there is a PART C to consider.
PART C states that the more time someone spends in the UK, the fewer undermentioned 5 connections that person is allowed to have if he /she wishes to be considered non- resident by HMRC
∗ Do you have a spouse living in the UK?- Minor children (not grandchildren) at boarding school ?- Do you belong to a golf, social club?
∗ Do you have a secondary home in the UK available for your use?
∗ Do you do consulting work in the UK where the remuneration is substantial in relation to your gross annual income?
∗ Have you had a “presence” in the UK the previous 2 tax years, ( spending more than 90 days there)?
∗ Do you spend more time in the UK than any other country?
These “connecting factors” would be combined with days spent in the UK, measured against a sliding scale, to determine whether a person is resident or not. For example, if someone spends fewer than 10 days in the UK in any tax year, he/she is obviously non-resident. If someone spends annually between 10-44 days in the UK, he/she would need 4 of the above connecting factors to be resident: between 56-89 days, then 3 factors have to apply: between 90-182 days, two factors must apply to be resident.
183 days and more – you are resident under the new Statutory Residence Test