A few years ago the UK Government in conjunction with Her Majesty’s Revenue & Customs (HMRC) announced that they would be introducing a new residence test. The intention was to clarify the status of people both leaving and arriving in the UK and there has been considerable discussion regarding exactly how and when to implement this.

The aim originally was to bring these new rules into effect from 6th April 2012, but this has been postponed to 6th April 2013. The purpose of this post is to provide you with an overview of the current proposals, as amended by the draft legislation that was published in December 2012. We are still however, awaiting the final legislation so it is possible the rules could be changed again before they come into force, although we do not anticipate anything major to change.

This Statutory Residency Test (SRT) will take into account  both the amount of time spent in the UK and other ties with the UK. It will be harder to become non-resident on leaving the UK than to become resident on coming to the UK.

The guidelines are set out below, although I appreciate that they are rather lengthy. Whilst I prefer to keep my articles much shorter, in this case it is important to set out the various rules that will apply.

Under the proposed SRT distinctions are made between:

  • Arrivers – individuals who were not UK resident in all of the previous three tax years; and
  • Leavers – individuals who were resident in any one or more of the previous three tax years.

The SRT will comprise three parts:

  • Part A – when the individual is always non-resident;
  • Part B – when the individual is always resident;
  • Part C – for those individuals who don’t fall within Parts A or B.

Part A (conclusive non-residence)

Individuals will be non-resident for a tax year if:

  • They are in the UK for fewer than 46 days (Arrivers) or 16 days (Leavers) in the tax year; or
  • They leave the UK for full-time work abroad – they must be in the UK for fewer than 91 days and can spend no more than 30 days working in the UK in the tax year.

Part B (conclusive residence)

Individuals will be resident for the tax year if:

  • They are in the UK for 183 days or more in a tax year; or
  • They have a home in the UK; or
  • They carry out full-time work in the UK.

The UK home test is complicated. The UK home must have been owned for a period of more than 90 days and used for at least 30 days (separate or consecutive) in the tax year. In addition, the individual must, for a period of 91 consecutive days (some of which fall in the relevant tax year), have either no home abroad or have one or more offshore homes, but have used none for more than 30 days during the tax year.

For the full-time work test, the employment in the UK must be for 365 days or more (with no significant break) and at least 75% of the days worked are in the UK. For these purposes, three hours work per day counts as a day’s work. (A mere three hours!)

If both Part A and Part B can apply to the same person, Part A (non-residence) takes priority. So, for example, if the taxpayer has a UK home but spends less than 16 days in the UK in a tax year, the taxpayer will be non-resident.

Part C (sufficient ties test)

Where neither Part A nor Part B applies, individuals need to know how many ties they have with the UK. The ties are:

  • Family – the individual spends time with his/her spouse/partner or minor children in the UK (other than children at boarding school provided certain conditions apply or minor children the individual sees for less than 60 days a year);
  • Accommodation – the individual has accessible accommodation in the UK for a continuous period of 90 days and makes use of it at least for at least 1 night during the tax year (or 16 nights or more if the property is owned by a relative);
  • Substantive work – the individual is employed or self-employed and works more than 40 days per year in the UK (working at least three hours per day);
  • UK prior presence – the individual spent 90 days or more in the UK in either of the previous two tax years; and
  • More time in the UK than in other countries – for Leavers only, if they spend more time in the UK than anywhere else.

Once the taxpayer has determined how many ties exist, you then look at the number of days spent in the UK. Basically, the more ties there are, the less time can be spent in the UK without being tax resident.


Number of ties Maximum number of days in UK (to be non-resident)
4 factors 45 days
3 factors 90 days
2 factors 120 days
1 factor 183 days

Leavers  (which will affect British expats currently living abroad)

Number of ties Maximum number of days in UK (to be non-resident)
4 factors 15 days
3 factors 45 days
2 factors 90 days
1 factor 120 days
No factors 183 days


The general rule is that the taxpayer must be in the UK ‘at the end of the day’ (i.e. midnight) for the day to count towards the residence test, but a new anti-avoidance rule is being introduced, where the taxpayer:

  • Has three ties or more to the UK;
  • Has been in the UK for 30 days without being present at midnight; and
  • Is a ‘Leaver’

Once these conditions have been fulfilled, any subsequent days spent in the UK without being present at midnight will count towards the residence tests.

The Finance Act 2013 is expected also to include an anti-avoidance rule for certain investment income received by ‘temporary non-residents’. This matches an existing rule for Capital Gains Tax, where an individual:

  • Has  been UK resident in four out of the previous seven tax years; and
  • Becomes non-resident for five tax years or  less;

The individual will be taxed on certain income received whilst temporarily non-resident. In particular, this will apply to dividends paid by closely controlled companies (e.g. with five or fewer shareholders).

Ordinary residence

The proposal is to abolish the separate concept of ‘ordinary’ residence. At present, individuals who are not ordinarily resident have some UK tax advantages, particularly if they are working partially in the UK and partially overseas. This is known as the ‘overseas workday relief’. The proposal is to have only one concept, of residence, but to bring in new laws to protect the overseas workday relief.

Going forward the relief will now only be available for ‘non-doms’, who have not been resident in any of the three previous tax years, and who do not expect to be based in the UK for three years or more. Grandfathering will apply for anyone else currently relying on the exemption. This will not be relevant to the majority of British expats.

Transitional rules

The new definition will not apply retrospectively. This means the current rules (based on case law) will still apply for periods up to 6th April 2013. There will however, be a limited transition provision where people need to know if they were resident in a previous year, in order to determine if they are resident after 6th April 2013.

Keren Bobker is an Independent Financial Adviser at Holborn Assets and writes at financialuae.me