UK Tax - Statutory Resident Test
On April 2013 the Statutory Residence Test (“SRT”) was introduced by HMRC in order to determine the residence status of individuals with connections to UK and the purpose of SRT is to determine whether an individual is a resident in UK for tax purposes.
The UK residence status affects whether an individual needs to pay tax in UK on his/her foreign income. Non-residents only pay tax on their UK income and they do not pay UK tax on their foreign income.
HMRC will use the following tests in determining whether an individual is the UK tax resident:
- Automatic Residence Test
- Automatic Overseas Tests
- Sufficient Ties Test
In the simplest terms, an individual will be considered as a non-UK resident for tax purposes if he/she meets the Automatic Overseas Test and does not meet the automatic residence test or Sufficient Ties Test. On the other hand, an individual will be considered as a UK resident if he/she does not meet the Automatic Overseas Test and meets one of the Automatic Residence Tests or the Sufficient Ties Test.
Automatic Residence Test
An individual will become the UK tax resident if any of the following conditions are satisfied:
- Present in UK for or more than 183 days in a tax year
- The individual has a home in UK
- Works full time in UK
- Where a person dies and they were UK resident in each of the three preceding years and broadly have a home in the UK when they died
Automatic Overseas Test
An individual will become the non-UK tax resident if any of the following conditions are satisfied:
- Leavers – spend less than 16 days in UK (Leavers are those individuals who have been resident in UK for any of the past three years)
- Arrivers – spend less than 46 days in UK (Arrivers are those individuals who have not been resident in UK for any of the past three years).
- Works full time abroad, and spends less than 91 days and less than 31 days working days in UK in the tax year
- Dies abroad having been not UK resident for two years and has spent less than 46 days in UK.
Sufficient Ties Test
An individual will need to consider the Sufficient Ties Test if he/she does not meet any of the Automatic Residence Test or Automatic Overseas Test. The Sufficient Ties Test essentially looks at whether an individual has ties which would deem him/her to be a resident in UK. Ties would include:
- Family tie
- Accommodation tie
- Work tie
- 90 day tie
- Country tie
Understanding how many ties which are required to determine the residence status will depend on the number of days that an individual spent in the UK during the tax year.
The following table simplifies this:
| Arrivers | Number of days in UK | Leavers |
| Not Resident | 0-15 | Not Resident |
| Not Resident | 16-45 | Resident if 4 ties |
| Resident if 4 ties | 46-90 | Resident if 3 ties |
| Resident if 3 ties | 91-120 | Resident if 2 ties |
| Resident if 2 ties | 121-182 | Resident if 1 tie |
| Resident | 183 or more | Resident |
Should you require further details or assistance on the above, please contact Kevin Lei at tax@zetland.biz
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