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UK residence and domicile status is important in order to determine an individual’s liability to UK taxes.

As a general rule taxpayers who are resident in the UK in a tax year are subject to UK tax on their worldwide income, while non-resident  individuals are subject to UK tax only on their UK income arising in that year.

Until 6 April 2013, the UK did not have statutory rules to determine an individual’s residence status.

Statutory residence test (SRT), introduced in Finance Act 2013, came into effect for tax years 2013/14 onwards.

STR has three parts:

  1. The automatic overseas test
  2. The automatic residence test
  3. The sufficient ties test.

An individual will be a non-UK resident if they meet any of the automatic overseas test. If none of the automatic overseas test is met, an individual will be resident in the UK if they meet any of the automatic UK tests or they meet the sufficient ties test.

Split year treatment

Strictly speaking, a person is tax resident or non-resident for a complete tax year.

However, if during a year a taxpayer either starts to live or work abroad or comes from abroad to live or work in the UK then the tax year will be split into two parts if specific criteria are met.

The legislation seeks to codify the residency status for a person leaving the UK and the residency status for a person arriving in the UK.

Article extracted from ACCA “In Practice” Newsletter