UK: Coming to Work in the UK: Ordinarily Resident or Not?

Last Updated: 24 May 2010
Article by Sarah K. Challis and Helena S. Whitmore

HM Revenue & Customs (HMRC) is taking an ever increasingly aggressive approach to taxpayers who claim a "non-domiciled" or "temporarily resident" tax status in the UK. Whether or not a taxpayer is "ordinarily resident" in the UK, is also relevant to determine the extent to which that taxpayer will be liable to UK tax. It remains a hot topic for those who claim the status.

A recent attack has been looking at "ordinary residence" status, of which the case of Tuczka v HMRC 2010 UKFTT 53 will come as very bad news to taxpayers. There is no statutory definition of "residence" or "ordinary residence" in the UK. The meanings have been derived and blurred through case law. Taxpayers had previously relied on guidance provided by HMRC in booklet IR20 to understand how they are likely to be treated by HMRC. IR20 was replaced with HMRC6 from 6 April 2009.

Under UK legislation, an individual will be taxable as if they were resident in the UK, if they spend 183 days or more in the UK in a given tax year. Ordinary residence is a more difficult concept, being more than residence. Its meaning has been derived from case law, and is "more than temporary [residence].... it connotes residence in a place with some degree of continuity."1 It is on the basis of these concepts that the UK courts and HMRC look at residence and ordinary residence in the UK for tax purposes.

The old guidance in IR20 provided that an individual who came to the UK, with the intention of staying for less than three years could be regarded as not "ordinarily resident" in the UK, potentially until the beginning of the next tax year following the third anniversary of their arrival. Therefore, if a taxpayer arrived on, say 1 June 2004, in tax year 2004/2005, and they could show they had not formed an intention to stay longer than three years, they would not usually be regarded as ordinarily resident until 6 April 2008. However, over the last few years, HMRC frequently challenged those who "passively" overstayed the three years and claimed their intentions had not changed.

In the light of the number of enquiries into this area, it was no surprise when HMRC withdrew IR20 and replaced it with the less prescriptive HMRC6. Although HMRC claimed its views had not changed, HMRC6 indicates that a taxpayer who overstays the three years will be regarded as ordinarily resident in the UK, with effect from the beginning of the tax year in which the third anniversary falls - a year earlier than the previous guidance suggested.

This has caused considerable confusion amongst taxpayers who previously relied on the IR20 approach to residence. It was therefore inevitable that further case law would arise out of this unclear area, which so far in itself has led to further confusion as the courts have considered the law independently of HMRC's stated practice.

The Case

The First Tier tax tribunal held that Dr. Tuczka, an Austrian national, was ordinarily resident in the UK although he had intended to spend less than three years there. When he reported himself to the UK tax authorities on form P86, he stated he intended to stay 2˝ - 3 years.

Perhaps rather surprisingly, given the previous emphasis by HMRC on "intentions," the court held Dr. Tuczka's intentions to be largely irrelevant in this case. The Court held that what mattered was that Dr. Tuczka had come to the UK for a "settled purpose" to work from the outset. His purpose of coming to the UK was held to be more important than his intentions of staying.

It is now very unclear how much reliance can be put on HMRC's published guidance, potentially resulting in the loss of valuable reliefs. Overseas workday relief is one such relief available to those not ordinarily resident and spend part of their working days outside the UK. Taxpayers who claim overseas workday relief are also likely to be in the UK for the purpose of employment, and hence the Tuczka case is highly relevant to them.

Another important factor the Court took into consideration in this case was that Dr. Tuczka bought a flat in May 1998. HMRC argued that the purchase of a property meant he was automatically ordinarily resident from the beginning of that tax year. The Court did not entirely accept this view, and taxpayers can take some comfort in Mr John Clark's closing remarks that the purchase of a property would not necessarily prevent a taxpayer from remaining not ordinarily resident, as long as the property was then sold in the limited period as provided in IR20.

A further important point to note from this case is that HMRC previously stated that any guidance produced by it is neither statutory nor binding on it, and therefore cannot be relied upon by a taxpayer in a court of law. This is a very unhelpful position for taxpayers who follow HMRC guidance. Mr John Clark recognised this and stated that where HMRC issues guidance, it is only fair that taxpayers who use it are able to rely upon it in court. However, taxpayers who use these rules without taking advice can expect a costly and lengthy investigation (Dr. Tuczka came to the UK in 1997, and he may appeal against this 2010 decision).

Another case that provides a contrast to Tuczka, is Philip George Turberville v HMRC [2010] UKFTT 69 (TC) which held that a taxpayer who overstayed the three year period indicated by IR20 was not ordinarily resident on his return to the UK for a three month period. As he had been made redundant, his return visit to the UK was not considered to be for a settled purpose.

What these cases show is that going forward, each taxpayer's circumstances need to be considered on the individual facts.

Footnotes

1. Levene –v- IRC [1928] AC 217 Viscount Cave

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.