Ten day limit set for non-residency

Jeannette McLellan Tax Partner at Bevan and Buckland

Jeannette McLellan

The Government is looking to provide a statutory framework to the rules that determine tax residence for individuals which could mean that some non-residents will only be able to spend 10 days in the UK if they want to be treated as a non UK resident for tax purposes.

Within two new consultation documents – the second of which deals with the reform of the taxation on non-domiciled individuals, the Government has admitted that the current rules that determine tax residence for individuals are overly complicated and unclear.

This consultation outlines three new categories under the residency testing rules:

Category A: conclusive non-resident

Category B: conclusive resident

Category C: individuals that do not fall into either of those two categories.

The residency test will take into account ‘connection’ factors such as family, accommodation, substantive work in the UK, UK presence in previous years and time spent in the UK compared with other countries.

Residency tests for categories A and B will be based on  counting the number of days spent in the UK, so those spending fewer than 10 days in the UK would be counted as non-resident regardless of other factors.

Those who work full time abroad will also be non-resident, as will those who have been non-resident in the UK in each of the previous three tax years (currently known as “arrivers”)  and who have spent less than 45 days in the UK in the current tax year.

Those who will definitely be counted as resident i.e. Category B’s are individuals who spend more than 183 days in the UK or have only one home and that home is in the UK.

For people who do not fall into either category, the consultation defines four factors that will be reviewed.

  • A UK resident family
  • Has substantive UK employment
  • Has accessible accommodation in the UK
  • Has spent 90 days or more in the UK in either of the previous two tax years.

The proposed rules mean that the tax authorities will in future take into account factors such as whether an individual owns property in the UK or still has a partner or children living in the country when determining their residency status.

In the second consultation, the Government has indicated that it could potentially abolish the tax liability of non-domiciled individuals on money they bring into the country – as long as the money is invested in a UK-registered company.

As part of these proposed changes, the annual charge that they must pay to HMRC will increase from £30,000 to £50,000.

How can Bevan and Buckland help?

We represent a number of non-resident and non domiciled clients, regularly advising on tax planning as well as other financial planning areas such as off-shore accounts.

If you are concerned that you may be affected by these new consultations then why not come and talk to our tax team or contact us on 01792 410100 or email us at tax@bevanbuckland.co.uk.

You can also get more advice by following @bevanbuckland on twitter or register for our email newsletter

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