CheckLists.Tax (beta)
R1. Individual becoming UK resident
STATUTORY RESIDENCE TEST
Day count
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Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
(1) 183 days spent in UK in tax year
- T is UK resident for a tax year if T spends at least 183 days in the in that tax year (Sch 45, para 7).
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
(2) Only home in UK
- Only home in UK (automatic UK residence unless automatic non-residence test met)
General
- If:
(1) T has a home in the UK during all or part of tax year X
(2) T spends sufficient time at that UK home in tax year X
- must be present on at least 30 days in tax year X (day on which it is T's home).
(3) There is a period of 91 consecutive day whilst T has that UK home and:
- At least 30 days of the period fall within tax year X; and
- Either T:
- has no home overseas, or
- does not have a home overseas that counts.
(4) None of the automatic overseas tests apply
- Then: T is resident in the UK for tax year X (Sch 45, para 8).
Notes
- T can satisfy this test even if T was not present in the UK at any time during the 91-day period. It focuses on homes, not presence in the UK.
- Whether a UK or overseas home "counts" during the 91 day period depends on presence on 30 days at any time during tax year X (but the days must all be in tax year X - see below).
- Apply by reference to each UK home.
Overseas home that counts
- An overseas home counts (when applying the 91 day test) if T is present on at least 30 days in that home in tax year X.
- Must be a home on the days T is present (see below).
- The 30 days of presence need not be during the 91-day period, but it must be a home on at least 1 of those days.
- e.g. if T has moved out + property is on market, not T's home anymore.
- Accordingly, there is a mismatch between:
- The 91-day period
- Must be consecutive days.
- May straddle tax years, as long as 30 days within tax year X.
- T does not actually need to be present in either the UK or the overseas home during this period for them to count.
-But the overseas property must continue to be a home (irrespective of occupation) for at least 1 day of the 91 day period to prevent the condition being satisfied.
- Equally, the UK home must be a "home" on every day of the 91 day period (irrespective of occupation).
- The 30 days spent in the overseas home:
- Each day must be in tax year X (even if the 91-day period extends out of tax year X).
- But they need not be consecutive.
- And need not be within the 91-day period.
- Note how this can catch T out if T changes homes near the beginning or end of a tax year (see below).
Counting 30 days
- A day counts if T is present in the home on that day for any amount of time.
- Does not need to sleep there etc.
- Presence on a day only counts if the property was T's home on that day (para 8(6)(b)).
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- T dies in tax year with only home in the UK (automatic UK residence unless automatic non-residence test met)
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Legislation:
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- Home (meaning of)
Sufficient degree of permanence
- Home depends upon there being a "sufficient degree of permanence or stability about P's arrangements there" (para 25(2)).
- Must relate to a particular structure/vehicle/vessel etc. rather than a place in general.
- "For the purpose of the SRT, HMRC consider that a person’s home is a place that a reasonable onlooker with knowledge of the material facts would regard as that person’s home." (RFIG22120).
- "The main difference between the term ‘home’ for SRT purposes and available accommodation, is that accommodation can be transient and does not require the degree of stability or permanence that a home does." (RFIG22160).
- Not the same concept as in double tax treaties (RFIG22120).
Potentially relevant indicators
- Time spent living in the property.
- Presence of close family (partner, children).
- Personal belongings (clothes, toys, etc.) are kept there even when absent (RFIG22140).
- Car kept at the property permanently (and insured for use).
- Family photos on the walls/around the property.
- Artwork and other expensive items kept at/displayed at property (or absence, if such items are present at another property).
- Meals are eaten there (RFIG22140).
- Sleeping there most nights (RFIG22140).
- Time spent when not working (RFIG22140).
- Presence of domestic staff (or their absence if T employs staff at another property).
- Presence of nannies.
- Visits by friends + family.
- Nature of insurance over property.
- Insurance for possessions at property (including expensive items, such as artwork).
- Doctor and dental appointments attended.
- Departing from and returning to the property for holidays/short trips.
- Ordinary activities, such as grocery shopping.
- Significant occasions spent there (Christmas, birthdays, etc.).
Multiple homes
- It is possible to have more than 1 home, including in the same country (RFIG22120).
- E.g. person who travels abroad for work 4 days a week, staying in a rented flat, returning to the UK at the weekend (RFIG22140).
- But if T travels abroad for a short period (e.g. 2 months), retaining their UK home, the overseas property may not become a home (in the RFIG22140 Example 4, the overseas property is a hotel).
Exclusion of holiday homes/temporary retreats
- "somewhere that P uses periodically as nothing more than a holiday home or temporary retreat (or something similar) does not count as a home of P's." (para 25(3))
- HMRC refer to a place "where an individual spends time for occasional short breaks, and which clearly provides a distinct respite from their ordinary day to day life" (RFIG22150).
- A property can change from home to holiday home and vice versa (RFIG22150, Example 3).
Types of structure
- Home can be a building, part of a building, vehicle, vessel or structure of any kind (para 25(1)).
Interest in the property
- No need for T to have an interest in the property (para 25(4)).
- e.g. room in relative's house.
- Equally, having an interest in a property does not make it T's home (para 25(5)).
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
RFIG22120 - The second automatic UK test and the concept of a 'home';
RFIG22140 - The principles and characteristics of a home for the purposes of the SRT;
RFIG22150 - What is not considered a home for the purposes of the SRT;
RFIG22160 - The statutory residence test accommodation tie;
Commentary:
See also:
- Starting to be a home (T moves in on a permanent basis)
- HMRC say that a property becomes a home not when it is capable of being used but when it is actually used as a home.
- Thus, if T buys a property + stays for one night before commencing renovation works , HMRC say it is not a home until T moves in on a permanent basis after the works are complete (RFIG22140, example 7).
- See also RFIG22150: "...a property purchased in such a state of disrepair that it is not capable of being lived in as a home, is not a home, until such time as it becomes habitable."
Legislation:
Cases:
HMRC manuals:
RFIG22140 - The principles and characteristics of a home for the purposes of the SRT;
RFIG22150 - What is not considered a home for the purposes of the SRT;
Commentary:
See also:
- Ceasing to be a home (stops being used as such rather than temporarily not used or unavailable)
- "A home will remain an individual’s home until such time as it stops being used as such by them." (RFIG22140).
Moving out
- If T moves T's possessions out, intending not to return (e.g. put on the market), the property ceases to be T's property at the point of moving out.
- "He did not return to his UK property after 3 June, and stayed in hotels or with friends, on the occasions he came back to the UK. The property is not his home from 3 June, the date Harry put his furniture and belongings into storage." (RFIG22150).
- Moving out temporarily does not necessarily cause a property to cease to be T's home (RFIG22140, Example 4).
- Moving abroad for a temporary purpose (e.g. looking after seriously ill relative for 10 months) will not cause the empty property to cease to be a home (RFIG22140, Example 5).
- If T is unable to stay at the property for a temporary period (e.g. due to flood damage), it can continue to be a home (RFIG22140, Example 6).
Renting out
- If T ceases to have a right to live in the property, it ceases to be T's home.
- If T rents it out but retains a right to live there and does live there, it can continue to be a home (RFIG22150).
Why this matters
- The 30 days of presence must be presence on a day when the property is a home (e.g. not when T is looking around).
- A property cannot count when applying the 91-day test unless it is a home at that time (irrespective of when the 30 days presence occurred).
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
RFIG22140 - The principles and characteristics of a home for the purposes of the SRT;
RFIG22150 - What is not considered a home for the purposes of the SRT;
Commentary:
See also:
- Trap: changing overseas home without spending 30 days in the old/new home in tax year X
Overseas home does not count at all for 91-day period straddling tax years unless occupied for 30 days in tax year X
- The 91 day period only needs to have 30 days in tax year X to count.
- But the overseas home relied on during that 91-day period also needs to have been occupied on 30 days in tax year X.
- So if T swaps overseas homes (e.g. by sale and purchase, or renting out the old home) near the end of the tax year and does not spend 30 days in the new property before the end of that tax year, the home does not count at all for any part of the 91-day period.
- It is irrelevant that T spends 30 days in the overseas home in the 91-day period in the next tax year.
- In other words, there is a mismatch between:
- the 91-day period (can straddle tax years)
- the need to have an overseas home during that 91-day period which was occupied for at least 30 days in tax year X.
Moving overseas homes at beginning of tax year X
- The same problem can arise at the beginning of tax year X.
- Assume:
- 91-day period running from previous tax to tax year X, with 30 days in tax year X.
- T moves overseas home at the beginning of tax year X without spending at least 30 days in the old overseas home in tax year X.
- No days spent in new overseas home during the 91-day period.
- Effect: the old home does not count at all when applying the test to tax year X, even if T spent 61 days in the old home up to 5 April in the previous tax year (i.e. 2/3 of the 91-day period).
Legislation:
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Commentary:
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- Trap: T ceases to have overseas home without replacement for 91 days (e.g. T rents it out or puts property on market)
- A related problem can arise if a property that was T's overseas home + at which T did spend 30 days in tax year X ceases to be T's home prior to a potential 91-day period (without T acquiring another overseas home).
- Overseas property does not remain a home simply because T continues to own it (para 25(5)).
T moves out of overseas property + puts it on the market, does not sell for 91 days
- If T moves out, the overseas property will cease to be a home.
- If T does not have another overseas home (e.g. replacement depends on sale), and the sale takes 91 days or more, T will not have an overseas home for those 91 days.
- If T has a UK home, T will satisfy the automatic UK residence test.
T rents overseas property out for 91 days
- If T is in the UK for several months, T may decide to rent overseas home out.
- If the period exceeds 91 days, T will not have an overseas home during that period and be automatically resident.
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Trap: multiple overseas home: 30 day test needs to be met in relation to at least one in tax year X
- If T splits their time between multiple homes, there is a risk that T will not spend sufficient days in any single overseas home to satisfy the test.
- Equally, the risk of the property being regarded as a holiday home (and thus not a home) increases if T's time spent is low.
- The problem becomes more complicated if the overseas home that T would rely on for the 30 days test is sold/bought in the tax year X (see above).
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
(3) Full time work in UK
(4) Sufficient ties
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- Accommodation tie (place to live available for 91-day period + T stays there once)
General
- If:
(1) T has a place to live in the UK;
(2) That place is available to T during tax year X;
(3) It is available for a continuous period of at least 91 days;
- disregard gaps in availability of fewer than 16 days (para 34(2)).
(4) T spends at least 1 night there in the tax year;
- Then: T has an accommodation tie (para 34).
"Place to live" can be transient
- Place to live includes a home, holiday home, temporary retreat.
- Also includes "accommodation otherwise available" to T where T can live when in the UK (para 34(3)(c)).
- Not necessary to have a legal right to occupy the accommodation (para 34(4)).
- "The main difference between the term ‘home’ for SRT purposes and available accommodation, is that accommodation can be transient and does not require the degree of stability or permanence that a home does." (RFIG22160).
Home of close relative (must stay 16 nights)
- If the accommodation is the home of a close relative of T's, T must spend at least 16 nights there in the tax year (instead of 1) (para 34(5)).
- Close relative (including by half-blood or by marriage/civil partnership):
- Parent
- Grandparent
- Brother/sister
- Child aged 18 or over
- Grandchild aged 18 or over.
Legislation: FA 2013, Schedule 45, para 34;
Cases:
HMRC manuals:
RFIG22160 - The statutory residence test accommodation tie;
Commentary:
See also:
- Family tie (partner/minor child UK resident)
General
- T has a family tie for tax year X if a family member is UK resident for that tax year (para 32).
- Sufficient that the person is a family member at any time during the tax year.
Family members
- Husband, wife, civil partner unless separated.
- Separate under court order, deed of separation or in circumstances where separate likely to be permanent (para 32(5)).
- Person with whom T is living together as if married/civil partners.
- T's child, under the age of 18.
- If child turns 18 in the tax year, still counts because there was a time in the tax year when a relevant relationship existed.
- Does not count if T sees the child in the UK on fewer than 61 days in tax year X.
- Or, if child turns 18 in the tax year, fewer than 61 days before the child turns 18.
Disregard family member's potential family tie with T
- When determining if a family member is UK resident, disregard their family tie with T (para 33(2)).
- This avoid circularity.
Child in full time education in UK: potential disregard
- If:
(1) The family member (C) is a child under the age of 18;
(2) C is resident in the UK for tax year X.
(3) C is in full-time education in the UK at any time in the year.
(4) C would not be UK resident in the year if the time spent in full-time education in the UK in that year were disregarded.
- i.e. the time spent in the UK during term-time (para 33(5)).
- term-time includes half-term breaks (para 33(6)).
(5) The number of days C spends in the UK outside of term-time is less than 21 days in tax year X.
- Then: the family member is treated as not being resident in the UK for the purposes of the family tie (para 33(3)).
- Notes:
- Query the position where C turns 18 during the tax year.
- The disregard of time in the UK only applies for determining C's residence in tax year X.
- Thus, C may satisfy the test for year 1 based on the disregard,
- but in year 2 the disregard does not affect C being resident in year 1 for the purposes of considering C's hypothetical non-residence in year 2.
Legislation: FA 2013, Schedule 45, para 32, 33;
Cases:
HMRC manuals:
Commentary:
See also:
- Work tie (3 hours on 40 days)
- T has a work tie if T works for more than 3 hours in the UK on 40 days in tax year X (para 35).
- For workers on vehicles, aircraft or ships see para 36.
Meaning of work
- T is working if T is doing something (para 26(1)):
- In the performance of duties of an employment held by T; or
- Have regard to whether, if T were paid for the thing, it would be employment income (para 26(2)).
- In the course of a trade carried on by T (alone or in partnership).
- Have regard to whether, if T incurred expenses in doing the thing, the expenses would be deductible for trading purposes.
Voluntary work
- A voluntary post for which T has no contract of service is not employment (para 26(8)).
Time travelling as work
- Time spent travelling counts as work (para 26(4)):
- If the cost of the journey would be deductible for employment or trading purposes; or
- To the extent that T actually works during the journey.
Training as work
- Training is work if it satisfies the general test above (para 26(6)).
- If not, training is also work as follows:
-Employment: training is work if (para 26(5)):
-training provided by or paid for by employer;
+ undertaken to help T in performing duties of employment.
- Trading: training is work if cost is deductible.
Location of work
- Work is done where it is actually done by T (para 27).
- Work during transport to/from the UK by air, sea or tunnel, is all treated as done outside the UK (para 27(2)).
- Special rules for people working on board vehicles, aircraft and ships.
Legislation: FA 2013, Schedule 45, para 35;
Cases:
HMRC manuals:
Commentary:
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- 90-day tie (90 days in UK in either of previous 2 tax years)
- T has a 90-day tie if T spent more than 90 days in the UK in either of the 2 tax years before tax year X (para 37).
Legislation: FA 2013, Schedule 45, para 37;
Cases:
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Commentary:
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SPLIT YEAR: ARRIVAL
- Country tie (most midnights in UK) (recent residents only)
- T has a country tie if, in tax year X, T spent the greatest number of midnights in the UK out of any country in that tax year (para 38).
T has a midnight in a country if T is present in that country at the end of the day.
- Does not matter if there is another country with an equal number of midnights as UK, as long as UK is highest.
Only recent residents
- Country tie is only a UK tie if C was resident in the UK for one or more of the 3 tax year preceding tax year X (para 31).
Legislation: FA 2013, Schedule 45, para 31, 38;
Cases:
HMRC manuals:
Commentary:
See also:
- Case 5: starting full-time work in the UK
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Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- Case 4: starting to have a home in the UK only
General
- If:
(1) T is resident in the UK in tax year X.
(2) T was not resident in the UK in the previous tax year.
(3) At the start of tax year X, T did not meet the only home in the UK test:
- Only home is in the UK; or
- All homes are in the UK.
(4) T begins to meet the only home in the UK test during tax year X.
- Home has the same meaning as in relation to the main SRT test (RFIG22130).
(5) T continues to meet that test for the rest of the tax year.
(6) For the part of tax year X prior to T beginning to meet the only home in the UK test, T does not have sufficient UK ties.
- Apply the main sufficient ties test but with the numbers determining sufficient ties reduced pro-rata (para 47(6), (7)).
- Residence of family members for family tie still judged on a whole year basis (para 47(8)).
- Then: tax year X is a split year for T.
- Overseas part of the tax year is the part before the day on which T begins to meet the only home in the UK test (para 53(5)).
- For priority between cases, see para 55.
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- Case 6: ceasing full-time work overseas
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Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- Case 8: starting to have a home in the UK
General
- If:
(1) T is resident in the UK in tax year X.
(2) T was not resident in the UK in the previous tax year.
(3) At the start of tax year X, T has no home in the UK.
(4) During tax year X, T begins to have a home in the UK.
- Home has the same meaning as in relation to the main SRT test (RFIG22130).
(5) T continues (from that point) to have a home in the UK for:
- the remainder of tax year X
+ the whole of the next tax year
(6) For the part of tax year X prior to T beginning to have a UK home, T does not have sufficient UK ties.
- Apply the main sufficient ties test but with the numbers determining sufficient ties reduced pro-rata (para 51(6), (7)).
- Residence of family members for family tie still judged on a whole year basis (para 51(8)).
(7) T is UK resident for the next tax year.
(8) The next tax year is not a split year for T.
- Then: tax year X is a split year for T.
- Overseas part of the tax year is the part before the day on which T begins to have a home in the UK (para 53(9)).
- For priority between cases, see para 55.
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
INCOME TAX
- Case 7: partner of someone ceasing full-time work overseas
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Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
- Effects of split year (only for certain charging rules)
General
- Split year treatment only applies for certain special charging rules.
- Otherwise, it has no effect on tax liability (para 40(3)).
Double tax treaties
- Split year treatment does not affect a person being UK resident for the purposes of a double tax treaty (para 42).
Legislation: FA 2013, Schedule 45;
Cases:
HMRC manuals:
Commentary:
See also:
Split year
Qualifying new residents
- Relevant foreign income not taxed
Transfer of assets abroad income
- The income deemed to arise to the transferor is treated as relevant foreign income to the extent that the income of the person abroad that the transferor has power to enjoy would be relevant foreign income if the individual received it (ITA s.726).
Legislation: ITTOIA s.845H;
Cases:
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Commentary:
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Pre-arrival investment management services
Income based carried interest received in year of UK residence taxed as profit of trade
Where an individual has provided investment management services whilst non-resident and a disguised management investment fee consisting of an income based carried interest arises in one of the first five tax years of residence, the disguised fee is treated as the individual's profits of a trade (in the year in which it arises). To the extent that the pre-arrival services were performed outside the UK, the trade is treated as carried on outside the UK.
Legislation: ITA 2007, s.809EZA(2A) - (2C)
Cases:
HMRC manuals:
Commentary:
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Remittance basis
- Change of situs of debt upon debtor becoming UK resident as a potential remittance
- HMRC suggest that if the debtor becomes UK resident and is a relevant person, that could be a remittance (RDRM33121).
- "If Gabriel had not taken on Lucian’s debt, and instead of the loan becoming sited in the UK due to the amending of the loan terms it changed situs because Lucian moved to the UK and became UK resident, Condition A would not be met. This is because no relevant person would have taken a step which resulted in the change of situs. However, the situation may be different if Lucian was a relevant person to Nevaeh."
Legislation:
Cases:
HMRC manuals:
Commentary:
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EMPLOYMENT INCOME TAX
- Loan to employee who later becomes UK resident or starts working in the UK
- The charge will apply if made in contemplation of the employee working or living in the UK and are in respect of that period (EIM26105).
- The charge will apply to a loan made when the employee was not chargeable to UK tax if, after the employee's earnings are chargeable to UK income tax, the employer in any way facilitates the continuation of an existing loan (EIM26105).
- HMRC say that the employer does not facilitate the loan merely because it is conditional on the employee continuing in employment, but would if the loan was conditional on the employer making regular payments to subsidise the interest, which it might cease (EIM26105).
Legislation: ITEPA s.16(2); s.173(2)(a);
Cases:
HMRC manuals: (EIM26105);
Commentary:
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CAPITAL GAINS TAX
Section 86: attribution of gains to UK resident settlor
- Gains treated as arising in split year: treated as arising in the UK resident part of the split year
- Where the trust is settlor interested and the settlor has a split year, the gains treated as arising under s.86 (because the settlor was UK resident in part of the year + settlor interested), they are treated as arising in the UK part of the year (s.86(4)).
- Note the broad definition of settlor interested.
- See further i5. Disposals and operations on trust assets.
Legislation: TCGA s.86;
Cases:
HMRC manuals:
Commentary:
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Section 87: matching benefits to gains
- Gains arising whilst settlor/beneficiaries non-resident
- Gains arising within a non-resident trust whilst the settlor and all beneficiaries are non-resident will still be in the trust gains pool if they become resident (even though the individual would not have been taxable if the gain had arisen to them instead).
- Pre-arrival precautions should, therefore, be taken in respect of such trusts.
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
- Gains matched to benefits in a split year: gain accrues in UK resident part
- Where gains are treated as accruing to an individual in a split year, they are treated as accruing in the UK part of the tax year (s.87(2A)).
Legislation: TCGA s.87;
Cases:
HMRC manuals:
Commentary:
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SDLT
- Different residence test for SDLT (183 days presence needed)
- The SRT in FA 2013, Sch 45 does not apply for SDLT purposes.
- Instead the test is based on 183 days presence within any continuous 365-day period falling within the relevant period.
Legislation: FA 2003, Sch 9A;
Cases:
HMRC manuals:
Commentary:
See also: