Since April 2013, HMRC has used a statutory residence test to determine whether an individual is a UK resident for the purpose of income or capital gains tax.
For most people who are UK resident, this is because they have spent more than 183 days in the UK. For others, it is more complicated.
Establishing whether a person is a UK resident involves going through a number of tests until one successfully confirms that they do, or do not, reside in the UK. These tests start with the more straightforward situations and gradually get more complicated.
The full HMRC guidance runs to 160 pages, so this article can only be a relatively brief summary of a complex subject.
The UK test
If an individual spends more than 183 days in the UK in a tax year, then they are UK resident for that tax year. If not, they move to the first automatic overseas test.
Overseas tests
If the person was UK resident for at least one of the previous three tax years, but they spent fewer than 16 days in the UK in this tax year, then they are not UK resident. Otherwise, the second automatic overseas test is used.
This test states that if an individual was not UK resident in any of the previous three tax years, and they spent fewer than 46 days in the UK in this tax year, then they are not UK resident. If this also fails to apply, the third automatic overseas test is used.
The third test states that if a person works overseas full time without any significant breaks, spends fewer than 91 days in the UK in the tax year, and has 31 days or fewer on which they work more than three hours in the UK, then they are not UK resident.
Those not meeting these criteria move to the second automatic UK test. See Boxes One and Two.
Second automatic UK test
If an individual has a UK home for at least 91 consecutive days (of which 30 are in the relevant tax year), is present in that home for at least 30 days in that tax year, and is present for fewer than 30 days in an overseas home, then they are UK resident. If not, the third and final automatic UK test applies.
Third automatic UK Test
A person will be resident in the UK if they work full time in the UK for a 365-day period without a significant break and meet the following three conditions:
• At least some of those days are in the tax year;
• Of the days on which they carry out at least three hours work, more than 75 per cent of them are carried out in the UK.
• There is at least one day in the tax year and the 365-day period in which they do more than three hours of work in the UK. See Box Three.
Sufficient ties test
If the individual does not meet any of the UK or overseas tests, then the next measure is to ascertain whether they have sufficient UK ties.
A person needs up to four UK ties to be UK resident, depending on the number of days they spend in the UK and whether they were UK resident in at least one of the past three tax years.
The country tie is taken into account if they were UK resident for at least one of the previous three tax years. See Box Four.
Split-year treatment
If split-year treatment applies, this means that in a year in which an individual is UK resident, they could nonetheless be mainly taxed as a non-UK resident for part of that year. Under this definition, they are still UK resident for an entire tax year.
Scottish or Welsh resident
To be Scottish or Welsh resident, a person first has to be UK resident. If they only have one residence and they live there for part of the year, then the location of that residence determines whether they are resident in Scotland, Wales or the rest of the UK.
If an individual has more than one residence, they are Scottish or Welsh resident if they spend more time in Scotland or Wales than in any other part of the UK. If they cannot identify their main residence, then their tax residency is based on the part of the UK in which they spend most days. Special rules apply for politicians who are members of the UK, Scottish, or European parliaments.
Other definitions
This article only covers HMRC tax residency. There are also other definitions that take into account where a person lives or works. This could include ordinarily working in the UK for automatic enrolment, or defining where they live for anti-money laundering purposes. Hence, it is possible that although an individual is UK tax resident, they could also be considered to be outside of the UK for another purpose.
Phil Warner is head of technical at Hargreaves Lansdown
