UK: Statutory Residence Test (Tax Newsletter, Summer 2011)

Last Updated: 3 November 2011
Article by John Watson, Alexander Cox, Paul Miller, Richard Palmer and Simon Swann

The proposed statutory residence test for individuals is intended to bring some much needed clarity and certainty to this currently vague and complex area. The existing position is largely governed by case law dating back decades and HMRC's guidance. It had its most high profile airing in the recent tussle between HMRC and Robert Gaines-Cooper, the Seychelles-based billionaire who "left" Britain in 1976.

The proposal comprises a self-assessed three-stage test: Part A (conclusive non-resident), Part B (conclusive resident) and Part C (different sets of "connection tests" combined with day counting to determine residence when A and B are inconclusive), the mechanics of which appear to be relatively simple. Needless to say, however, there are some less defined areas in the connection tests which may not be straightforward to apply in borderline cases and keeping detailed records of time spent in the UK, and activities while here, will remain important.

The test will supersede all existing legislation, case law and guidance for tax years following its introduction, expected to be from April 2012. For periods prior to this, however, individuals will still need to use existing case law/HMRC guidance and it is not intended that there will be any transitional rules. This may lead to some confusion as it leaves taxpayers looking back to the case law to self-assess for earlier periods and in respect of any enquiries into these periods, and also using the old rules to determine which part of the statutory residence test they fall under.

Conclusively non resident - Part A

Individuals will not be resident in the UK where they spend only a short time here or have very little connection with the UK, specifically, where they:

  • are not resident in all of the previous three tax years and present in the UK for fewer than 45 days in the current tax year; or
  • are resident in one or more of the previous three tax years and present in the UK for fewer than ten days in the current tax year; or
  • leave the UK to carry out full-time work abroad, provided they are present in the UK for fewer than 90 days in the tax year and no more than 20 working days are spent in the UK in the tax year.

Employers will therefore need to be very careful that non-resident status for employees transferred outside the UK is not lost by breaching this threshold of 20 working days in the UK. Again, detailed record-keeping will be vital.

"Full-time work abroad" in this context broadly means working outside the UK for at least 35 hours per week and for at least one full tax year.

"Working day" means any day on which three hours or more of work is carried out.

Conclusively resident - Part B

An individual will be conclusively resident in the UK if they:

  • are present in the UK for 183 days or more in a tax year; or
  • have only one home and that home is in the UK (or more homes but all are in the UK); or
  • carry out full-time work in the UK.

For this part of the test, "full time work" means working inside the UK for at least 35 hours/week, carried out over a continuous period of more than nine months (excluding short holidays/illnesses) and not more than 25 per cent of the duties can be undertaken outside the UK within that period.

For both parts A and B, a person will be treated as being in the UK on any day where he is in the UK at midnight at the end of that day. However, a day will not count if the person arrives in the UK as a passenger, departs from the UK on the next day and does not engage in any activity which is work related/unrelated to the travel while here.

Complex cases - Part C

Individuals are divided into those arriving in the UK, having been non-resident previously (arrivers) and those seeking to cease being UK resident (leavers). As per recent case law, it will be harder for leavers to relinquish residence than it is for arrivers to acquire residence, shown by the number of "connection factors" that the individual has with the UK, combined with a given number of days spent in the UK, to deem the individual UK resident.

The connection factors, which are relevant if they occur at any point in the tax year, are:

  • whether there is a UK resident family (broadly, spouse and minor children);
  • whether the individual has substantive UK employment, including self-employment (i.e. 40 or more days working in the UK in a tax year);
  • whether the individual has accessible accommodation in the UK (this does not include accommodation such as hotels or short-term accommodation provided by an employer which is also available to other employees);
  • whether the individual spent 90 days or more in the UK in either of the previous two tax years;
  • whether the individual has spent more days in the UK in the tax year than in any other single country (leavers only).

The new residence test puts far less emphasis on the individual's living and working arrangements outside the UK than the current case law principles.


Days spent in the UK: < 10

Connection factors and residence (Arrivers): Non-resident

Connection factors and residence (Leavers): Non-resident


Days spent in the UK: 10-44

Connection factors and residence (Arrivers): Non-resident

Connection factors and residence (Leavers): Resident if individual has four factors


Days spent in the UK: 45-89

Connection factors and residence (Arrivers): Resident if individual has four factors

Connection factors and residence (Leavers): Resident if individual has three factors

------------------------------------------------------------------Days spent in the UK: 90-119

Connection factors and residence (Arrivers): Resident if individual has three factors

Connection factors and residence (Leavers): Resident if individual has two factors

------------------------------------------------------------------Days spent in the UK: 120-182

Connection factors and residence (Arrivers): Resident if individual has two factors

Connection factors and residence (Leavers): Resident if individual has one factor

------------------------------------------------------------------Days spent in the UK: >183

Connection factors and residence (Arrivers): Resident

Connection factors and residence (Leavers): Resident


Split years

A tax year will be split into periods of residence and non-residence in certain circumstances. For employers, the key circumstances are where the individual:

  • becomes resident by starting full-time employment in the UK;
  • loses UK residence by virtue of working abroad full time; or
  • returns to the UK following a period of working full time abroad.

This will generally ensure that an individual will be taxed in the UK from the date of arrival until the date of departure, notwithstanding the point of the tax year in which these take place.

A tax year will not be split where an individual's residence status changes due to changes in the number of connection factors under Part C.


As ever, HMRC is keen to ensure that these new rules cannot easily be manipulated. Accordingly, anti-avoidance rules will apply where an individual has been resident for four of the seven tax years prior to the year in which they become non-resident. If the individual then becomes resident again in any of the following five tax years then, generally, income arising in the years of non-residence will be deemed to arise in the tax year in which the individual becomes resident again. This will not apply to all types of income, however. Earnings from employment or self-employment and regular income from dividends and bank interest will generally be excluded.

The consultation also considers reforming the concept of ordinary residence: either abolishing it altogether or introducing a statutory definition. Ordinary residence is important in that it allows individuals who are not ordinarily resident in the UK to claim the remittance basis on foreign investment income and income from foreign employment duties. However, the proposals in this respect are, as yet, at an early stage.

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.

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