Despite the UK Government’s goal for the legislation to create a simplified way to determine residence, the series of tests to be considered are in fact very complex and require close attention to detail. The tests are outlined below, but it should be emphasised that professional advice will be required in most cases, particularly whilst the legislation remains relatively untested through the courts.

The basic rule

An individual will be resident in the UK for a tax year if:

• One of the automatic residence tests is met for that year; or
• The sufficient ties test is met for that year.

If neither of these tests is met for that year, then the individual is not resident for UK tax purposes in that tax year.

Automatic overseas tests

An individual is automatically non-resident for a tax year if they meet any of the following tests:

1. The individual was resident in the UK for one or more of the three preceding tax years, and spends fewer than 16 days in the UK in the tax year; or
2. The individual was not resident in the UK in any of the three preceding tax years, and spends fewer than 46 days in the UK in the tax year; or.
3. The individual works full-time abroad for the tax year without any significant breaks from that overseas work, and:
• Spends fewer than 91 days in the UK in the tax year, and
• The number of days in the tax year during which the individual does more than 3 hours work in the UK is fewer than 31.

Full-time work is defined as one or more employments or self-employments with a combined total hours of 35 or more per week. Note that the UK day counting limits whilst working abroad will be reduced pro-rata where the taxpayer leaves part way through a tax year.

4. The individual dies in the tax year and was not UK resident in the preceding two tax years and the number of days spent in the UK during the tax year is less than 46.

Automatic residence tests

Subject to not meeting any of the automatic overseas tests, an individual is automatically resident in the UK for a tax year if they meet any one of these tests:

1. The individual spends 183 days or more in the UK in the tax year; or
2. The individual has a home in the UK for more than 90 consecutive days (which can straddle two tax years), and
• The individual is present in that UK home on at least 30 separate days during the tax year, and
• While the individual has that UK home there is at least one period of 91 consecutive days when they have no home overseas (or they have one or more homes overseas but each of those homes is a home at which the individual is present on fewer than 30 separate days during the tax year); or
3. The individual works full-time in the UK for 365 days (which can straddle two tax years) with no significant break of 31 days or more other than for leave and sickness, and:
• All or part of that work period falls within the tax year, and
• More than 75% of the total number of days in the tax year when the individual does more than 3 hours work are days in the UK.

The definition of full-time work is again a combination of employments or self-employments taking up at least 35 hours a week.

4. The individual dies in the tax year, and
• Was UK resident by virtue of the automatic residence test for each of the preceding three tax years, and
• The year before the tax year of death was not a split year; and
• Their home was in the UK or if they had more than one home, at least one of them was in the UK.

“Home” is not restricted to owned property. Property advertised for sale or let is not an individual’s home, providing they are living at another residence.

If any one of these automatic UK tests applies for a particular tax year, and none of the automatic overseas tests apply, then the individual will be UK resident for tax purposes for that tax year.

Sufficient ties test

If none of the automatic overseas or automatic UK residence tests are met, the individual must consider his connections to the UK (“ties”) and determine whether his ties, in conjunction with the number of days spent in the UK, are sufficient for him to be considered UK resident for a particular tax year.

What counts as a UK tie varies according to:

• Whether or not the individual was UK resident in any of the three tax previous tax years, and
• The number of days that the individual spends in the UK in the tax year under consideration.

The effect of the rules is that the more ties an individual is deemed to have in the UK, the less days he can spend in the UK without becoming UK resident.

“Arrivers”

If the individual was not UK resident in any of the three years before the year under consideration, he will need to consider if he has each of these UK ties:

• A family tie (an individual has a family tie if his spouse, civil partner, cohabiting partner or minor child is UK resident in the current tax year),
• An accommodation tie (an individual has an accommodation tie if he has UK accommodation available to him for at least 91 days and he spends at least 1 night there (or 16 or more nights if the accommodation is that of a close relative),
• A work tie (an individual has a work tie if he does more than 3 hours work a day in the UK for at least 40 days), and
• A 90-day tie (an individual spends more than 90 days in the UK in either or both of the two preceding tax years)

“Leavers”

If an individual was resident in the UK for one or more of the preceding three tax years he will also need to consider if he has a country tie (the country in which an individual is present for the greatest number of days in the tax year). If this is the UK then this tie is counted.

Ties and Day Counting

The number of days an individual spends in the UK in a tax year dictates the number of UK ties that are needed for him to be UK resident. This is set out in the table below:

Days spent in the UK in tax year under consideration	Number of UK ties required for UK residence
	Arrivers	Leavers
16–45 days	4 ties	Always non-resident
46–90 days	3 ties	4 ties
91–120 days	2 ties	3 ties
More than 120 days	1 tie	2 ties

Potential Pitfalls

The most common pitfalls that we have encountered to date tend to involve clients failing to take appropriate advice, particularly in relation to the following areas:

1) Days spent in UK

A day only counts if the individual is present in the UK at midnight, unless:

• They are in transit in which case midnight is ignored, or
• They have to spend time in the UK due to exceptional circumstances which are beyond their control (e.g. sudden or life threatening illness or national or local emergencies and they intends to leave the UK as soon as circumstances permit).

Usually, if an individual is not present in the UK at the end of the day, that day will not count as a day spent in the UK. However, the deeming rule applies to an individual for a tax year if the individual has at least 3 UK ties for a tax year, and

• Has been present in the UK on more than 30 days in the tax year, without being present at the end of that day, and
• Has been UK resident in one or more of the preceding three tax years.

If an individual meets all these conditions the deeming rule means that, after the first 30 qualifying days, all subsequent qualifying days within the tax year are treated as days spent in the UK.

2) Split Year Treatment

Where an individual moves to live or work abroad, or comes from abroad to live in the UK, the tax year may be split into periods of residence and non-residence which may be beneficial to the taxpayer. Split year treatment applies in specific circumstances if an individual:

• Leaves the UK to take up full-time work abroad;
• Accompanies a partner leaving the UK to take up full-time work abroad;
• Leaves the UK to establish a home abroad, ceases to have a home in the UK and limits return visits to the UK to fewer than 16 days in the remaining part of the tax year of departure;
• Comes to the UK during the tax year and starts to have their only home in the UK or otherwise acquires a home in the UK according to the above tests;
• Comes to the UK during the tax year and starts full-time employment in the UK; or
• Accompanies a partner who comes to the UK and starts to have their only home, or start full-time employment in the UK

The costliest pitfall we have seen in this area to date is where an individual ceased working full-time overseas and returned to the UK. Unfortunately, the individual had failed to take into account the fact that the UK day counting limits whilst working abroad are reduced pro-rata where the taxpayer takes up residence in the UK part way through a tax year. This meant that when they returned to the UK to take up residence, they had already exceeded the permitted number of days spent in the UK during the overseas part of the tax year. As a result, all overseas income and gains were brought within the charge to UK tax. Had the individual taken appropriate advice, this could easily have been avoided.

Final Comments

Although a definitive statutory test for residence is to be welcomed where it brings certainty to taxpayers, the new rules are complex and still open to some interpretation, particularly where an individual has a UK home of any sort. Day counting is now much more stringent and requires careful record keeping. For individuals flying in/out of Dublin, receipts should also be kept in order to prove any nights spent in ROI rather than in Northern Ireland.

In addition, following the UK Government’s Summer 2015 Budget, there is to be a consultation this Autumn examining changes to the UK’s current domicile rules which we expect to have a significant impact on non-UK domiciled individuals coming to the UK from abroad.

Hopefully this article demonstrates just how important it is that professional advice is taken with regard to UK residence issues.

Stuart Gartery is a Tax Manager with BDO Northern Ireland.

Email: stuart.gartery@bdo.co.uk

Tele: 02890 439009

Website: www.bdoni.com