HM Revenue & Customs has attempted to clarify a few points in its non-dom statutory residence test, although tax advisers have suggested some rules are no clearer.
A guidance note published today (23 August) gave some updates on the statutory residence test, introduced in the Finance Act 2013.
This replaces the version published in May and attempts to clear up rules around transit days for non-doms flying through the UK.
It gives a scenario where a lawyer, who lives in France but works internationally, lands in London Gatwick at 6.30pm on Tuesday and his onward flight departs from Heathrow at 2pm on Wednesday.
In the first version, he meets a colleague by chance, catches up on non-work related conversation and later uses personal email and social media.
His day of arrival in the UK may be treated as a transit day and will not count as a day of presence in the UK for statutory residence test purposes, while his departure day may also count as a qualifying day under the test’s deeming rule.
This is because the meeting was not planned and he and his colleague did not talk about work issues. His use of social media at the hotel is acceptable as it was not used in any way whatsoever for business or work purposes, stated HMRC.
However, in the second similar scenario, the lawyer and his colleague discuss a case they are both involved in.
That evening, he contacts his boss on social media to make him aware of the earlier discussion and they exchange some emails on the case.
His day of arrival in the UK may not be regarded as a transit day and will be treated as a day spent in the UK for statutory residence test purposes, read the guidance note. If he works in the UK for more than three hours, the day will also count as a UK work day. His departure day may also count as a qualifying day under the test’s deeming rule.
Gary Heynes, national head of the private client team at RSM UK Tax and Accounting, said the examples demonstrate HMRC does not understand business.
“The difference between the two examples is trivial and has little basis in reality, I find it hard to believe things would ever be this clear cut,” he commented.
John Cullinane, tax policy director for the Chartered Institute of Taxation, said the examples prove business content cannot be disregarded, even for chance meetings or internet use. “If someone’s up against their days limit, then something like that might tip them over,” he added.
The other significant change is around the types of events which may give increase to exceptional circumstances that are exempt from the statutory residence test. Crucially, HMRC has added ‘or’, so the statement now reads ‘sudden or life threatening’.
“The type of events will be, by their nature, out of the ordinary and it is difficult to be prescriptive about what characteristics such an event would exhibit,” read the guidance.
“However local or national emergencies, such as civil unrest, natural disasters, the outbreak of war or a sudden serious or life threatening illness or injury to an individual are examples of circumstances that are likely to be exceptional.”
There may also be limited situations where an individual who needs to stay in the UK to deal with a sudden or life threatening illness or injury to a spouse, person with whom they are living as husband and wife, civil partner or dependent child can have those days spent in the UK ignored under the SRT, subject to the 60-day limit.
Mr Cullinane suggested these changes could be taken as a liberalisation of the rules, noting they were probably a response to a query around the wording, as it was unlikely HMRC intended it to be both sudden and life threatening.
“These are minor clarifications, but it’s a positive sign that HMRC have been so quick to tweak things after the update in May.”
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, told FTAdviser the changes do seem to allow more flexibility around when someone is allowed to be in and out of the UK for tax purposes.
“This seems to address some of our concerns, although I’m still trying to digest the whole document,” she stated.
peter.walker@ft.com
