Expats Beware: New UK Tax Residency Tests

New and complex rules relating to tax residency in the UK have been proposed. They allow more specific determination of tax residency. These rules add clarity but cast the tax net wider. So, who is the beneficiary here: you or the taxman?

Following my articles regarding tax over the past two weeks (“Expats: What is Your Tax Situation?” and “Double Tax Agreements: Friend or Foe?”) some readers tabled additional questions about the specifics of the new UK statutory residence test and the new UK state pension regulations.

The new UK tax residency tests have been designed to be very specific. In the past we saw rules which were often manipulated to the advantage of the individual. This culminated in the Gaines Cooper case which Her Majesty’s Revenue and Customs (HMRC) won, and was a landmark case used as a major test of residence and abuse of tax rules.

The new proposed rules are complex. There are three major tests used to determine UK tax residency:

Part A – The Automatic Overseas Test

You will be deemed a UK non-resident for tax if:

  • You were deemed non-resident in the UK for the previous three tax years and you visited the UK for less than 46 days in the current tax year, or
  • You were resident in the UK for one or more of the previous three tax years but spend less than 16 days in the UK in the present tax year, or
  • You leave the UK in the current tax year for full time work abroad, are in the UK for less than 91 days and do not work for more than 20 days in the UK in the current tax year.

If you do not meet any of these criteria then you move to:

Part B – The Automatic Residence Test

You will be deemed a UK tax resident if:

  • You are present in the UK for 183 days or more in the current tax year, or
  • You have a home which is available to you for at least 90 days in the tax year, or you have more than one home in the UK, or
  • You work full time in the UK, for a minimum 35 hours per week, with a contract for at least a year, and you spend less than 25% of your working time abroad in that tax year

If you do not meet any of these criteria then you move to:

Part C – UK Connecting Factors

If parts A or B have not been sufficiently conclusive, then there are four ‘connecting factors’ which must be assessed and used to determine your UK tax resident status:

  • You have close family resident in the UK, such as a spouse and children, rather than siblings, parents etc.
  • You have substantive UK employment with an employer or by being self employed
  • You spent 90 days or more in the UK in either of the previous two tax years
  • You spend more days in the UK than in any other single country

The above are linked with this table of days spent:

New UK Tax Residency Tests

With these tests you should be able to conclusively determine whether you are a tax resident in the UK for the tax year commencing 6 April 2013. However, I can see that some expats may have difficulty, such as those who:

  • Are relatively new expats, in their first three years abroad
  • Live in Thailand but have a home available to them in the UK, which they use
  • Spend time in several countries over the course of a year, creating a situation where the UK is the one country where they spend the most time of all the countries they visit
  • Spend more than 46 days in the UK per year

If you are still in doubt and feel that you need specific advice about your own situation then I suggest you contact a professional adviser to discuss the details.

Years ago the ‘one-sixth rule’ was used for expats. Whilst this rule was used there was also the principle that you may have been UK tax resident if the ‘centre of your life’ was deemed to be in the UK. This is where the confusion crept in. The new rules are intended to make the situation clear and allow you, as an individual, to assess your own situation as to your UK tax residency.

In acknowledging the reasonableness of the proposed new regulations it would also appear that there may well be a greater number of persons who can be deemed resident in the UK for tax purposes. The government would then further its current indomitable attitude of increasing revenues; some may say at any cost.


Expat Tax Advice | Andrew WoodQuestions for Andrew can be directed to PFS International on  +662-653-1971 or email via enquiriesthailand@fsplatinum.com

You can also connect with Andrew on Linkedin here

Andrew Wood has been an expat in Asia for 32 years and is Executive Director with PFS International. He has been writing Net Worth articles for four years and has made a significant contribution to the PFS library of financial service articles dating back over seven years. These articles which cover the complete A-Z of financial planning are available to readers upon request.


2 Comments to “Expats Beware: New UK Tax Residency Tests”

  1. Pennypoppet 3 September 2013 at 1:57 pm #

    I have been living on the Isle of Man for more than 30 years and have not spent more than 46 days in the UK in that time.I plan to buy a flat in the UK . How many days can I stay in the UK. The flat will be bought buy an offshore company.

  2. PFS International 7 September 2013 at 6:06 pm #

    It is rather difficult to respond to this accurately because the rules are complex and will apply to individuals in a diverse way. It is impossible to say a specific number of days in the UK. If the property is exclusively for your use, then you are in danger of being considered resident if you spend 16 days or more in a year. If the property is unavailable to you, as you have a tenant, then it will not really affect you.

    The point is that HMRC will evaluate where the centre of your life is rather than a simple number of days in the UK.

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