The Statutory Residence Test is used in the UK to determine the residency status of an individual. Whether an individual is a UK resident or not is an important factor in determining how their worldwide income should be taxed. There are three tests to determine the residency status of an indivudal:
1. The Automatic Overseas Test
2. The Atutomatice Residence Test
3. The Sufficient Ties Test
The Automatic Overseas Test is always considered first when determinging the residency status of an individual. If an individual meets none of these conditions then the Automatic Residence Test will be used. If the residency of an individual cannot be determined using either of these tests, finally the Sufficient Ties Test is considered. The Suffcieint Ties Test is usually needed for those individuals who spent between 46 and 182 days in the UK during the tax year.
What is your residency status?
The Sufficient Ties Test
There are 5 ‘ties’ to consider in the Sufficient Ties Test which include:
· You have a spouse who is resident in the UK or
· You have a child who is under 18 and resident in the UK who you see at least 61 days in the tax year
· You have a place to live in the UK which is available for you to use for a continuous period of at least 91 days in the tax year and you actually spent at least 1 night there during the tax year
· You have worked for at least 40 days during the UK tax year. (A workday consists of at least 3 hours of work)
4. UK presence:
· You were present in the UK for at least 90 days in either of the previous two tax years
5. Country (only for individuals who have been a UK resident for at least 1 of the previous 3 tax years):
· You spent more days in the UK than in any other country individually in the current tax year.
The number of ‘ties’ you have with the UK is combined with the number of days you were present in the UK during the tax year to determine your residency status.
The Split Year Treatment
The split year treatment allows certain UK residents to split their tax year so that for part of the year they will be taxed as a UK resident and the other part as a non-UK resident.
The split year treatment applies automatically if you are a UK resident for the tax year and you fall into any of the following categories, you are:
· Starting to work overseas
· Accompanying a partner overseas
· Ceasing to have a home in the UK
· Starting to have an ‘only home’ in the UK
· Starting full-time work in the UK
· Coming to the UK after ceasing full-time work abroad
· Returning to the UK with a partner
· Starting to have a home in the UK