Treasury pulls residence tax test out of Finance Bill

Absent from the Finance Bill 2012, published today (6 December), was the proposed statutory residence test for tax.

David Gauke, the exchequer secretary to HM Treasury, has announced the proposals have been withdrawn and will be reintroduced in Finance Bill 2013 to take effect from 6 April 2013. Changes to ordinary residence status will be addressed at the same time.

The reason given for this was the need for more time to consult thoroughly on the detail of the changes well in advance of implementation.

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George Bull, senior tax partner of Baker Tilly, said: “Of course, as we’ve said on many occasions, careful consultation produces better tax law. But even after all the consultation which has already taken place, has something gone wrong?

“One can’t help but wonder whether some of the side effects of the proposed connection tests – such as penalising overseas parents of children being educated in the UK – have been subject to a challenge under the Human Rights Act.

“Whatever the case, the deferral is significant as it will lead to another year of uncertainty with more battles between HMRC and individuals over their residence status.”