Are you leaving the UK, we at SMCO UK Chartered Tax Advisors can provide bespoke advice on your individual UK tax residence circumstances so you can plan in advance.
Statutory Residence Test (SRT)
The concept of tax residence in the United Kingdom (UK) is fundamental to determine the UK tax liability for any individual.
The Statutory Residence Test (SRT) framework outlines the rules and records required to become non UK tax resident. The tax residence status is an important role and applies for income tax, capital gains tax and inheritance tax purposes
When this can apply to you
- Leaving the UK to go on secondment / assignment with your employer.
- Relocating overseas to another country with your family.
- Expatriates that are leaving the UK after a period of living in the UK.
- Starting a new job overseas with a new employment.
- Living the nomadic lifestyle.
- Having to travel constantly overseas for work.
- Other personal circumstances, and much more.
The SRT tests
The SRT is based on three specific tests which must be considered in a sequential order in every case: automatic non-resident test, automatic resident test and a sufficient ties test. The tests are applied to the individual facts in the ‘the year for which the UK tax residence status is being determined – the relevant tax year.
The automatic non-resident test
If this test is satisfied the individual will be not UK tax resident the relevant tax year and no further tests are required.
There are three possible tests, and if an individual satisfies any one of these they will be not be UK resident in the relevant tax year. The conditions are as follows:
- If an individual was resident in the UK in one or more of the previous three tax years, the limit in the UK is 15 days in the relevant tax year; or
- If an individual was not resident in the UK in all of the previous three tax years, the limit in the UK is 45 days in the relevant tax year; or
- If an individual works full time abroad for at least a complete tax year. Then the limits of their presence in the UK is up to 90 days in the relevant tax year, of which no more than 30 days spent working in the UK in the tax year.
The first two tests are simply based on a day count and the number of days an individual was present in the UK at midnight in the relevant tax year. Days of presence can be disregarded where an individual spends a day in the UK due to circumstances beyond their control or days spent in transit.
If you are planning to go abroad for work (employed or self employed) or starting a new employment overseas the third test in particular will need to be reviewed in greater detail as there are a number of complex conditions with the number of full time work hours, the amount of time you can be off work for leave, sickness, maternity etc.
HMRC will expect evidence to be provided if it is claimed that the time limit for a working day has not been exceeded.
The way the subsequent residence tests are structured mean that it if this is not met, those who are planning to leave the UK for work may could find themselves as treated as resident and face a tax issues in more than one jurisdiction.
The automatic resident test
If the above-mentioned test is not met, then the individual then the individual will be conclusively UK resident if they meet any of the following:
- They are present in the UK for 183 days or more in the relevant tax year
- They have an only home in the UK for at least 91 consecutive days and they are present in that home in the relevant year for at least 30 days. They must also not have an overseas home or if they do they are present in the overseas home for fewer than 30 days.
- They work full time in the UK for a period of at least 365 days, without a significant break A at least three-quarters (75 percent) of their time is spent working in the UK.
The ‘home’ test may be of real significance for most individuals that are leaving the UK. If that test applies, the number of days in the UK is not a consideration and many an get caught out.
A home does not have to be a place of residence that the individual owns, the legislation details that a home can be a building or part of a building and can include a vessel or vehicle. Therefore, the case of a home must be reviewed and considered if you are leaving the UK, when they acquire an overseas home, what the status if of their UK home.
The sufficient ties test
If the residence status is not conclusive under the above-mentioned first two tests, the individual must then look at how the sufficient ties test applies to them for the relevant tax year.
The sufficient ties test combines the number of days the individual spends in the UK in the relevant tax year and the number of ties they have to the UK.
The principle is that the more ties an individual has to the UK, the less time they can spend in the UK following their departure if they want to be not resident.
There are many specific complexities to each of the UK ties but the ties are outlined below.
- a family tie – the individual has a spouse, civil partner, unmarried partner or minor child resident in the UK.
- an accommodation tie – where there is accommodation which is available for at least 91 days in the tax year and nd they spend at least one night there in the year. If the accommodation is the home of a ‘close relative’ the one night is extended to 16 nights.
- a work tie – where there are at least 40 or more working days, for at least three hours or more in the relevant tax year
- a 90-day tie – more than 90 days were spent in the UK in either or both of the previous two tax years
- country tie – more time is spent in the UK than in any other single country in the relevant tax year.
The more ties an individual has to the UK the less time they may spend in the UK if they wish to be regarded as non-resident when they leave.
The table below only applies when the individual is a ‘leaver’ (an individual who was UK resident in one or more of the three previous tax years).
Days in UK | Number of ties sufficient for UK residence |
16 – 45 | at least 4 ties |
46 – 90 | at least 3 ties |
91 – 120 | at least 2 ties |
121 – 182 | at least 1 tie |
183 days or more | Always resident |
Special rules for other circumstances
The SRT rules are adapted where an individual is an ‘international transport worker’ and these are individuals whose duties are performed on board a vehicle, aircraft or ship, while it is travelling or carries on a trade, the activities of which consist of the provision of services on board a vehicle, aircraft or ship as it is travelling. For example oil rig workers, seafarers, pilots
There are further residence tests which only apply if the individual has died in the year.
These other rules may include not just the SRT under the UK tax legislation but also double tax treaties with other countries where you are considered domestically resident in two or more countries.
These rules are not covered in this residence factsheet, if they do apply to you get in touch and we can help you.
Split year rules on leaving the UK
The default rule will be that if an individual satisfies the SRT conditions they are resident for the whole of that tax year. However, this case does not fit all circumstances.
Special rules apply in certain circumstances to allow in the year of the departure from the UK to be split into resident and non-resident parts. These rules are complex and we will be happy to discuss whether your plans or circumstances will be eligible for the split year treatment.
Anti-avoidance rules
There are anti avoidance provisions in place as the government wants to ensure that individuals are not able to exploit the UK tax residence rules to become not UK tax resident for a short period, and release substantial amounts of income or capital gains.
An individual must be non UK tax resident for a specified period otherwise they will be taxable in the UK on certain types of income and capital gains in the year they return to the UK.
How we can help
Prudent planning is key, so you understand your tax implications of the Statutory Residence Test. We at SMCO UK Chartered Tax Advisors would be happy to have a chat about your position. Please contact us if you would like further advice.
