Prior to the introduction of the SRT, by Extra Statutory Concession the tax year could be split into periods of residence and non-residence in certain circumstances, when someone came to, or left, the UK part way through a tax year. This prevented some individuals being taxed as if they were resident for the parts of the year before they came to the UK or after they left. The new rules will, in eight statutorily defined cases, treat a tax year as being split into periods of residence and non-residence if individuals:.
If an individual is not resident for a tax year under the SRT, then split year treatment will not apply.
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Split year treatment does not apply to individuals acting in the capacity of personal representatives, but can apply to individuals acting as trustees of settlements in limited circumstances. The new rules will seek to counteract the risk of individuals creating artificial short periods of non-residence, during which they receive a large amount of income which accrued during periods of UK residence free of UK tax and then bringing the income back into the UK tax free.
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In particular, it will apply to dividends paid by closely controlled companies that reflect profits that have built up during a period of residence and which are then taken out during a short period of non-residence. It would not apply to all types of income that are received when a person is non resident. For example, it would not apply to earnings from employment or self-employment or to normal types of regular investment income, such as bank interest or dividends from listed companies.
You meet this test if you work sufficient hours overseas over the tax year in question, provided you have no significant breaks from work, and are present in the UK for fewer than 91 days in the tax year of which no more than 30 days are spent working for three hours or more in the UK.
You work for a sufficient number of hours abroad if you leave the UK to perform work abroad and are:. The number of hours worked per week is worked out using a five step calculation. In practice individuals will be faced with an onerous burden of record keeping in order to be able to provide the information which they or their advisers will need, to be able to perform the five step calculation and apply the test.
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Any hours worked overseas on days where more than 3 hours are spent working in the UK are disregarded for the purposes of the 5 step calculation. When you work full-time abroad, no more than 30 working days can be performed in the UK in any one tax year.
Statutory Residency Test | Tax Innovations
This limit will be reduced pro rata if you are treated as being not resident for part of a year under the split year rules. Although you must be present in the UK for fewer than 90 days, this limit will again be reduced pro rata if you are treated as being not resident for part of a year under the split year rules. A working day is any day on which three hours or more of work is carried out. If you carry out fewer than three hours of work, the day will not count towards the threshold of 30 working days in the UK. Even if you are not present in the UK at the end of the day, you will still be treated as working in the UK on that day if you have worked in the UK for three hours or more.
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Where you work in the UK for fewer than three hours on a particular day, you would be expected to have sufficient records to demonstrate this fact. You meet this test if you work sufficient hours in the UK as assessed over a day period, with all or part of the day period falling in the tax year in question and have no significant breaks from UK work. Again, a significant break from UK work is taken to be a break of 31 continuous days or more. The work must be carried out in the UK over a continuous period of more than days which falls into a tax year excluding short breaks such as illness or holidays.
Any days on which you spend more than 3 hours working overseas but also spend time working in the UK are disregarded for the purposes of the 5 step calculation. 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.
Statutory Residence Test (SRT)
Where the accommodation is owned by parents or grandparents, siblings or adult children or grandchildren, you may spend up to 15 nights there without triggering an accommodation tie. Where there are gaps of less than 16 nights between points when the accommodations is available then it will be treated as available during the gaps. For example, a businessman based overseas who stays at the same hotel for fortnightly business trips to the UK could find himself triggering an accommodation tie. This sets out a further five ties to the UK which must be considered, together with the number of days spent in the UK, in order to determine your residence.
There are five elements to the connecting ties test. If you were non UK resident for any of the preceding three tax years you will need to consider the first four ties, and if you were resident in the UK for one or more of the three preceding tax years you will also need to consider the fifth tie. The number of days you spend in the UK in a tax year will dictate the number of UK ties that are needed for you to be UK resident.
Overview of the legislation
The statutory residence test is designed to determine residence status for the whole tax year. In one part of the tax year you will be treated as UK resident and in the other part you will be treated as non-UK resident. Again if this scenario might apply to your own circumstances, it is important to seek advice from a tax specialist.
For more information on tax planning for non UK residents or for support in determining your UK residence status, please contact Lesley Stalker by emailing las rjp. Looking to incentivise staff? Paying too much tax? Do you have trust tax issues? Get free tax tips straight to your inbox by signing up for our Livewire newsletter here.
You spend fewer than 91 days in the UK in the tax year; The number of days in the tax year on which you work for more than 3 hours in the UK is less than You spend days or more in the UK in the tax year; You have a home in the UK during all or part of the tax year. You will meet this test if there is at least one period of 91 consecutive days, at least 30 of which fall in the tax year, when you have a home in the UK in which you spend a sufficient amount of time and either you: Have no overseas home; or Have an overseas home or homes in each of which you spend no more than a permitted amount of time.