New rules to the HMRC Statutory Residency Test could leave a minority of expats liable to pay UK taxes. The old rules stipulated that anybody earning an income in the UK and stayed here for more than 90 days in any one calendar year would be liable to pay tax on their income. The new Statutory Residency Test is designed to prevent people manipulating the number of days they spend in the UK to avoid paying tax.
The new rules come into effect in July 2013 and will be divided into two main sections; automatic or conclusive test and the sufficient ties test.
Automatic or conclusive test
The majority of expats will fall into the initial category and requires you to answer some simple questions as follows:
– You have not lived in the UK for the three previous tax years and spend fewer than 46 days in GB
– You have lived in the UK in the last three tax years, but have spent less than 16 days in the current tax year
– You work abroad full-time and have spent less that 91 days in the UK, and less than 31 of those days working in the current tax year
HMRC will consider you are a resident of the UK if you spend more than 183 days working in the UK or have a home in the UK for more than 90 days and visit it for 30 days in the tax year.
HMRC sufficient ties test
If the automatic tests do not determine your residency status you will be required to take a sufficient ties test – and this is where things can get complicated. Again, this is broken down into two parts; arrivers and leavers.
Arrivers are individuals working in the UK that have not been resident in the past three tax years. Leavers are those who have been resident in the UK in one or more of the last three years. In both cases, if you have the following ties in the UK you will be liable to pay tax:
– Spouse, civil partner or child under the age of 18 who are resident in the UK
– You have a home available to you for at least 91 days and you spend at least one night there in the tax year
– You do not work full-time in the UK, but perform more than 40 days work in the UK
– You have spent more than 90 days in the UK in the past two tax years
– You have spent more days in the UK than any other country in the tax year
The number of conditions that apply depends on the number of days you spend in the UK – ranging from 16 – 182 days in a tax year. It should be noted that once you are classed as a UK resident, your worldwide income is taxed.
The new rules are designed to catch expats that have moved abroad. If you would like more advice about the new Statutory Residency Test call Taxaccolega, a low fixed fee accountant in London, on 08000 235 234 or email firstname.lastname@example.org