The March 2011 Budget announced a statutory test for determining the tax residence status of individuals. This was in response to growing criticism from individuals and advisers that the then rules , whereby residence status was determined on a combination of past decisions by the courts and guidelines issued by HMRC, did not offer sufficient certainty for taxpayers, employers or HMRC, and followed several high profile court cases.
The planned introduction of the test from 6 April 2012 was put back to 6 April 2013 as further time was needed to iron out various anomalies. The fourth and final draft (following amendments made to the Finance Bill 2013) was granted Royal Assent in July 2013.

The test aims to set out some more objective criteria and to give all parties concerned more certainty of the position. However, this has come at the cost of some very detailed new rules, which are outlined below. The rules, though, are
complex and full professional advice should be taken in relation to specific circumstances.


The test has three main constituent parts. The first two look at more straightforward circumstances where an individual will be treated as ‘automatically overseas’ or ‘automatically resident’.The third applies where neither of the first two tests are met and a wider range of factors must be considered.

The ‘automatic overseas’ test

The first part is the ‘automatic overseas test’, which allows an individual to spend up to 15 days in the UK in the year without being treated as UK resident (or up to 45 days if non-resident in the previous three tax years). Those working abroad full-time will also be automatically non-resident provided fewer than 91 days are spent in the UK (including fewer than 31 UK workdays).

The ‘automatic residence’ test

Failing the first test, he must consider the second test which is the ‘automatic residence test’. Broadly, an individual will be treated as automatically resident in a tax year if he is present in the UK for 183 days or more, has his only home in the UK for at least 91 consecutive days or works fulltime in the UK.

The ‘sufficient ties’ test

If neither of these tests is satisfied, the third test is considered. This is the ‘sufficient ties test’ whereby the individual’s ties to the UK are considered in conjunction with his UK visits. The ties include family ties, available accommodation, substantive UK work, spending more than 90 days in the UK in either of the previous two years and, in the case of those leaving the UK, time spent in the UK exceeding time spent in another country. The more ties an individdual has, the fewer days of UK presence are allowed before being treated as resident. The ties are favoured for individuals arriving in the UK (i.e. not UK resident in the previous three tax years) over those leaving, broadly allowing arrivers more time in the UK in comparison with leavers with the same number of ties. The trade-offbetween UK ties and days of presence (for arrivers and leavers) is summarised in Table 1.

Table 1


A wealthy Italian individual (who has never been resident in the UK) who owns a house and a substantial art collection in the UK, (as well as several other houses worldwide) will be able to make regular visits of up to 45 days per year
without being treated as UK resident, as he will satisfy the automatic overseas test. If he spends longer here and so does not meet the tests for ‘automatic overseas, he will need to consider whether he meets the test for automatic residence. Assuming he does not meet that test, the number of days he has available to spend in the UK will be determined by the ‘sufficient ties test’.
Owning a property in the UK (available to him for a continual period of at least 91 days during the year and where he spends at least one night there in the 2013/14 tax year) he will have met the accommodation criteria “tie” for the basis of the SRT. With no further ties with the UK for the purposes of the SRT as his family live in Italy and not performing substantive work in the UK (40 days or more in the tax year), he has one tie with the UK and is therefore able to spend up to 182 days in the UK in the 2013/14 tax year before he is treated as UK resident for UK tax purposes.
However, if he spends more than 90 days in the UK in 2013/14 (even if he spends insufficient days to be treated as UK resident) he will have created another tie for consideration in 2014/15. He will only be able to spend up to 120 days in the UK in 2014/15 before treated as UK resident.In either case, had the relevant limit been exceeded, our individual would have been treated as UK resident for tax purposes for the relevant tax year, meaning that he would be chargeable to tax in the UK against his worldwide income for that year.


Note that residence status is considered for the tax year as a whole, although there is provision for a split year treatment in some circumstances, whereby the tax year is split between UK and overseas parts. This will apply to many arrivers or leavers though the rules around this are rather complex and have been further updated since the publication of the Finance Bill. There are also special rules that apply on death.


Overall, the introduction of the statutory residence test is a positive step. It will offer a great deal more certainty to internationally mobile individuals who need to determine their residence status. However, although the basic framework of the test is straightforward, there is a lot of complexity in the rules. There are a very large number of thresholds to consider and they do not always applyconsistently for different parts of the test. Additionally, some terms are still quite subjective, such as the definition of a ‘home’. A careful consideration of the rules is vital in every case.

Patricia Mock is a Director in the private client tax practice at Deloitte. She has many years’ experience advising in all areas of taxation matters affecting ultra-high net worth individuals, including company executives, non-UK domiciles and entrepreneurs