Director 3 Easy Steps To Confirm UK Tax Residency With A Simple Statutory Residence Test

Tony Dhanjal

This Article Contains

Determining your UK tax residency status can be a daunting task. The guidance in the statutory residence test doesn’t make for light reading and as always with tax the language used isn’t exactly user friendly.

In this article we are simplifying the process needed to determine your own UK tax residency status when taking a statutory residence test.

What Is The Statutory Residence Test?

The UK’s statutory residence test is a set of questions and criteria that will help to determine an individuals UK tax residency status. This is needed because an individuals UK tax residency status is the main factor that determines how and where they are taxed.

Broadly speaking a UK tax resident will pay tax on their worldwide income. This means that even where the income is arising outside of the UK, HMRC will want to know about it and potentially apply tax to it, whereas if you are Non UK tax resident then the UK tax authorities will usually only look to tax you on any of your income that actually arises here in the UK.

The statutory residence test it therefore very important for individuals who have foreign income and spend time outside of the UK as they will need to determine their UK tax residency status before they will be able to calculate how much tax to pay.

Step 1 – Were You In The UK More Than 183 days?

When considering your UK tax residency status, the very first question in the statutory residence test asks if you were present in the UK more than 183 days in a tax year.
 

The way a “day” is determined throughout the framework does vary, at times it will refer to a working day rather than a calendar day but broadly speaking you will be considered to have spent the day in the UK for tax purposes if you are present in the UK at midnight at the end of that day.

If you spent more than 183 days in the UK on this basis during a tax year then the statutory residence test will be very simple and you will be a UK tax resident for that particular tax year.

If you do not meet the first test then you will need to progress to step 2. 

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Step 2 – Take Automatic Overseas Tests

The second step of the statutory residence test involves checking to see if your personal circumstance result in HMRC automatically considering you to be a non resident for tax purposes. Again this will be based on the number of days you spent in the UK during a tax year but also depend on your UK tax residency status in previous years and whether you were working full time overseas.

The 3 automatic overseas tests are:

  1.  You’ll be non UK resident in the tax year if you were resident in the UK for one or more of the three years prior to the current tax year and you spent fewer than 16 days in the UK in the tax year
  2. You’ll be non UK resident for the tax year if you were resident in the UK for none of the three tax years prior to the current tax year, and spent fewer than 46 days in the UK in the tax year
  3. You’ll be a non UK resident for the tax year if you worked full time overseas over the tax year and:
  • You spent fewer than 91 days in the UK in the tax year
  • The number of days on which you work for more than 3 hours or more in the UK is less than 31
  • There is no significant break from your overseas work
The first 2 overseas tests should be fairly straightforward to apply and mean that anyone who spent fewer than 16 days in the UK in a tax year will be an automatic overseas resident but if you have historically been a non resident (for the past 3 tax years) then the number of days is extended to a maximum of 46.
 
If neither of the first 2 tests apply then the third test may require a little more thought. Where the test stipulates no more than 91 days can be spent in the UK again this will usually refer to the number of days where you were present in the UK at midnight. Where the test states that there can be no more than 31 days where the individuals worked for more than 3 hours in the UK this can refer to both employed and self employed individuals (as does the rest of the testing) but doesn’t apply to voluntary workers or workers onboard a vehicle aircraft or ship. Where the test states that there can be no significant break this usually applies to any period where the individual spends more than 31 days without working more than 3 hours overseas except where this is a result of annual leave, sick leave or parenting leave.
 
If you do not meet any of the 3 automatic overseas tests from the statutory residence test then your UK tax residency status is still unknown and you will need to continue to step 3.
 

Step 3 – Automatic UK Tests & Sufficient Ties Test

As you can imagine you are potentially worth more in tax revenue to the UK tax authorities as a UK tax resident rather than a non resident so the third step is to test again for anything that would give you a UK tax residency status.

Much like the automatic overseas tests, there are also 3 automatic UK tests. These are:

  1.  You will be UK resident for the tax year if you spend 183 days or more in the UK in the tax year (This is the same test from step1 and if you have made it to step 3 is actually redundant at this point)
  2. You’ll be UK resident in the tax year if you have, or have had, a home in the UK for all or part of the year and the following all apply:
  • there is or was at least one period of 91 consecutive days when you had a home in the UK 
  • at least 30 of these 91 days fall in the tax year when you have a home in the UK and you’ve been present in that home for at least 30 days at any time during the year
  • at that time you had no overseas home, or if you had an overseas home, you were present in it for fewer than 30 days in the tax year          

          3. You’ll be UK resident for the tax year if all of the following apply:

  •  you work full time in the UK for any period of 365 days which falls in the tax year
  • more than 75% of the total number of days in the 365 day period when you do more than 3 hours of work are days where you do more than 3 hours of work in the UK
  • at least 1 day which has to be both in the 365 day period and the tax year is a day on which you do more than 3 hours work in the UK
As the first automatic UK test is somewhat redundant if you made it this far through the testing you will likely be jumping straight to test 2 which targets individuals who have a home in the UK. 
 
In simple terms, if you had a home in the UK for more than 91days at any point (the full 91 days doesn’t need to fall within the tax year) and you spent 30 or more of those days in the home (the 30 days does need to fall within the tax year) then assuming that you have no overseas home that you spend more than 30 days in the tax year at then you would become a UK tax resident by virtue of having a deemed main home in the UK.
 
The third test targets anyone who works in the UK and will try to assign you UK tax residency status based on the amount of time you spend working in the UK. It is particularly relevant for individuals who work in the UK but potentially don’t live in the UK (which does happen). 
 
 

Sufficient Ties

If you have failed all of the automatic overseas tests and the automatic UK tests as well then the final step is to consider your ties to the UK which in conjunction with the number of days that you spent in the UK will determine your UK tax residency status.

The sufficient ties section of the statutory residence test looks at:

  • Family ties
  • Accommodation ties
  • Work ties
  • 90 day ties
  • Country ties
The country tie is only considered for individuals who were tax resident in the UK in one of the previous three tax years. The rest of the ties are applicable to everyone.
 
A family tie – applies to individuals who’s husband, wife or civil partner or child under the age of 18 are UK resident in their own right. A partner who you are not married to or in a civil partnership with will also constitute a family tie if you are living together as if you were husband & wife or civil partners. There are also some specific conditions that apply to children under the age of 18.
 
An accommodation tie – applies to individuals who have a place to live in the UK that is available to them more than 91 days and they spend at least 1 night there during the tax year. If the place to live is the home of a close relative such a grandparent, brother or sister then the number of nights that can be spent there during a tax year is increased to 15. Meaning 16 or more nights and the individual will have a tie.
 
A work tie – applies to individuals who do more than 3 hours work in the UK on more than 40 days in a tax year. It does not matter if the days worked are consecutive or not.
 
A 90 day tie – applies to individuals who have spent 90 days or more in the UK in either or both of the previous 2 tax years.
 
A country tie – applies where the UK was the country that the individual was present in at midnight for the greatest number of days in a tax year. Even where the UK is tied as the joint most days this will be considered a country tie. Remember that the country tie is only need to be considered by those who have been UK resident in one of the last three tax years.
 
 Once you have calculated how many ties you have to the UK and totalled up the number of days that you spent in the UK during a tax year you can then apply that information to one of the two tables below. If you exceed the relevant limit of ties that are allowed based on the number of days your spent in the UK then you will be a UK tax resident.
 
 

I Don’t Understand The UK Tax Residency Status And Statutory Residence Test

If you’re still having trouble understanding how the UK statutory residence test applies to you or you just want to build on your existing knowledge then check out the additional courses on international tax from The Accounting & Tax Academy now.

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